VERTEX COMMUNICATIONS CORP /TX/, 10-K, 1995-12-18

VERTEX COMMUNICATIONS CORP /TX/
10-K, 1995-12-18
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-----------

FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO ________________

COMMISSION FILE NUMBER: 0-15277

----------------------------------------

VERTEX COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)

TEXAS 75-1982974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2600 N. LONGVIEW STREET, KILGORE, TEXAS 75662
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (903) 984-0555

------------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
None None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)

------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

As of December 1, 1995, 4,423,256 shares of the Registrant's Common Stock, $.10
par value, were outstanding. The aggregate market value of the Registrant's
Common Stock held by non-affiliates based on the closing sales price on
December 1, 1995, as reported by The Nasdaq Stock Market (National Market
System), was approximately $45,000,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended September 30, 1995, are incorporated by reference into Items 5, 6, 7, and
8 under Part II and Item 14 of Part IV hereof.

Portions of the Registrant's definitive Proxy Statement to be filed in
connection with the solicitation of proxies for its 1996 Annual Meeting of
Shareholders are incorporated by reference into Items 10, 11, 12, and 13 under
Part III hereof.

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<PAGE> 2
VERTEX COMMUNICATIONS CORPORATION

ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended September 30, 1995

===================================================

PART I

ITEM 1. BUSINESS.

GENERAL

Vertex Communications Corporation (the "Registrant," the "Company,"
or "Vertex") designs, develops, and manufactures an extensive line of precision
earth station antennas for satellite communications. The Company's antennas
range in size from 1.8 to 34 meters in diameter and operate in all relevant
commercial and military frequency bands, including C-band, X-band and Ku-band.
The Company also manufactures antenna control systems that control the movement
and tracking capabilities of antennas, related electronic components used to
amplify radio frequency ("RF") signals, as well as precision microwave
waveguide components for application as component parts of communications
systems. To complement its antenna products, the Company also provides custom
engineering, turnkey field installation, spare and replacement parts, site
testing, and after-sale and maintenance services.

The Company's strategy is to provide a wide variety of
technologically advanced satellite communications earth station antenna
products to satisfy an expanding range of customer and industry requirements.
To accomplish its objectives, the Company engages in ongoing efforts to
introduce, in a timely manner, products that are designed to meet applicable
domestic and international specifications. The Company believes that it offers
a more diverse line of products than any of its principal competitors. Due to
the exacting design and engineering requirements necessary to produce satellite
communications antennas, quality control and precision engineering are central
to the manufacturing process. The Company believes it has developed a
reputation as a leader in quality control procedures which has enhanced its
position in the marketplace.

The Company markets its products to systems integrators and to end
users who combine the Company's products with other communication equipment to
form complete communications systems. In the United States, Vertex markets its
products through a direct sales force; while in international markets, the
Company utilizes a direct sales force, supplemented by independent foreign
sales representatives. Vertex's customers include the television broadcast
industry, international telecommunications companies, communications common
carriers, private communications networks, and government agencies, including
certain agencies of the U. S. Government and various foreign governments.

The Company was organized pursuant to Texas law in 1984. The
Company's wholly-owned subsidiaries include: Gamma-f Corp., a Nevada
corporation headquartered in Torrance, California; Vertex Antennentechnik GmbH,
a corporation organized pursuant to the laws of the Federal Republic of
Germany, with its headquarters in Duisburg, Germany; Vertex International,
Ltd., formed under the laws of England, with its headquarters near
London;Vertex Foreign Sales Corporation, organized pursuant to the laws of The
Virgin Islands, with its office in St. Thomas, The Virgin Islands; and Maxtech,
Inc., a Pennsylvania corporation which is located in State College,
Pennsylvania. As used herein, the terms the "Registrant," the "Company," and
"Vertex" refer to Vertex Communications Corporation and its wholly-owned
subsidiaries, unless otherwise indicated. The Company's principal executive
offices are located at 2600 North Longview Street, Kilgore, Texas 75662, and
its telephone number is (903) 984-0555.

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<PAGE> 3
EARTH STATION ANTENNA INDUSTRY

An increase in demand for transmission and reception capacity to
support high-speed voice, video, and data communications has resulted in
significant demand for additional satellite and earth station equipment.
Communications satellites, once placed in orbit above the earth, relay
microwave radio signals from one or more earth stations to one or more other
earth stations at various geographical locations. The primary function of an
earth station is to transmit or receive a microwave radio signal via satellite
in order to efficiently facilitate the telecommunications process.
(Telecommunication is the process of communication through electronic means
such as radio, telegraph, television, and computer.) Each earth station is
interconnected to a local communications network which distributes and/or
collects the desired information to or from the users of such information. A
typical earth station consists of several components, including an antenna and
associated electronic components, some of which amplify RF signals and others
that control the movement and tracking capabilities of the antenna.

A principal advantage of satellite communications systems over
terrestrial communications systems is that once a satellite has been launched,
the incremental cost of adding new transmission and reception points is limited
to the cost of the earth station. With a terrestrial communications system,
each transmission route must receive a right- of-way clearance and incur
additional costs attendant to laying connecting cable or erecting microwave
towers and repeater stations. As a result, a satellite communications system
frequently offers advantages as a cost-effective medium for long-distance
communications, as compared to the cost of a terrestrial communications system
which is usually higher.

Communications satellites use the C-band, X-band and Ku-band for
transmission in the radio frequency spectrum. The Company designs and
manufactures satellite communications earth station antennas that operate in
each of these frequency bands. C-band antennas are capable of receiving and
transmitting information in the radio frequency band of four to six gigahertz.
The C-band frequency spectrum is also used for terrestrial microwave
transmissions. Due to the increasing use of the C-band frequency, the Ku-band
frequency (12 to 14 gigahertz) has been reserved exclusively for satellite
transmission by the Federal Communications Commission ("FCC") and an
international agreement. Since wavelengths in the Ku-band are relatively
short, they can be gathered and concentrated by a smaller antenna dish than is
required with longer wavelength C-band transmissions. Therefore, Ku-band
transmission enables earth station vendors and voice, video, and data
communications service providers to bring satellite communications directly to
customers' facilities. The X-band frequency spectrum (seven to eight
gigahertz) is reserved for utilization in worldwide military satellite
communications.

THE VERTEX STRATEGY

The Company's strategy is to provide a wide variety of advanced
earth station antennas and associated products to satisfy evolving customer
requirements. The Company believes its experience in refining current products
and developing new products will enable it to expand distribution and gain
market share.

The Company believes this strategy has been, and will continue to
be, successful because of the following key elements:

TECHNICAL EXPERTISE. Vertex believes its technical expertise,
together with its ability to comply with exacting engineering and design
specifications, has contributed to its ability to increase sales. The ability
of its engineering and design staff to respond rapidly to detailed customer
requirements has enhanced the Company's competitive position.

BROAD PRODUCT LINE. The Company's product strategy is to establish
and maintain a prominent market share by emphasizing the development and
distribution of a wide array of quality products. The Company believes its
telecommunications products comprise one of the industry's broadest product
lines. This

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extensive product line positions the Company to respond to a variety of
customer requirements and to gain market share by expanding penetration into
new and existing markets.

SKILLED SALES FORCE. The Company's distribution strategy focuses
on the needs of systems integrators and large end users that require a sales
force possessing advanced technical knowledge and expertise. The Company
believes its sales force is qualified to differentiate and promote the benefits
of its products from those offered by competitors, to respond promptly to solve
customers' communications problems, and to address customers' future
communications requirements as their needs evolve and organizational functions
change.

INTERNATIONAL OPERATIONS. Emerging demand has created the need for
substantial investment in telecommunications infrastructures in many
international markets. The Company believes that a significant opportunity
exists in the market for satellite earth station antennas and associated
products outside of the United States. The Company adapts its product
development, marketing and distribution strategies to comply with the unique
requirements of specific international markets. The Company expects its
international sales volume will continue to grow.

ACQUISITIONS AND GROWTH. The Company expects that planned sales
growth will be largely dependent on its ability to expand its existing plant
facilities and increase personnel or to implement selected, strategic
acquisitions which will complement existing business and enhance market share
in the industry.

Consistent with this strategic objective, Vertex acquired Maxtech,
Inc. of State College, Pennsylvania in January 1995. Maxtech's products and
capabilities are an excellent fit within Vertex's product line and are an
integral part of a typical earth station communications system.

PRODUCT DEVELOPMENT. The Company works closely with its customers
to identify market needs and define product specifications early in the
development process. This approach results in a thorough understanding of end
user requirements prior to commencement of the design process and often
positions the Company to develop and deliver new products or refinements of
existing products in response to its customers' needs more rapidly than many of
its competitors. The Company believes that the flexibility of its product
designs and the capabilities of its engineering staff, combined with its
adherence to superior quality control standards, have enabled it to be
consistently among the first-to-market with competitive new products or
innovative refinements of existing products.

VERTEX PRODUCTS

EARTH STATION ANTENNAS AND ASSOCIATED PRODUCTS. The Company
manufactures an extensive line of earth station antennas capable of operating
in the commercial and military frequency bands from one to 30 gigahertz, which
range in size from 1.8 to 34 meters in diameter, as well as the related
electronic components used to control the movement and tracking capabilities of
antennas. These products require exacting engineering skills and detailed
standards or specifications as established by each customer, involving not only
antenna design, but the complete integration of other components acquired from
the Company or other sources.

Through its subsidiary, Gamma-f Corp., the Company designs and
manufactures precision microwave waveguide components such as filters,
diplexers, and radio frequency feed subsystems. These products are sold
directly to end users and suppliers who integrate such products with other
components in telecommunications systems. The Company also utilizes these
products as component parts of certain of its antenna products.

Through its subsidiary, Vertex Antennentechnik GmbH, the Company
designs and supplies products which complement its existing broad line of
antenna products such as precision antenna reflectors,

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<PAGE> 5
multi-axis pedestals (antenna support structures), controller drive systems,
radio telescopes, and optical telescopes.

Through its subsidiary, Maxtech, Inc., the Company designs and
manufactures a variety of Low Noise Amplifiers (LNAs), Solid State Power
Amplifiers (SSPAs), and other related high performance products used in
telecommunications systems.

The Company's products are utilized by its customers principally
for telecommunications applications with certain products used in radio
astronomy.

CUSTOM ENGINEERING. The Company provides custom engineering
services and believes it is among the industry leaders in developing related
custom-engineered products. Significant examples of Vertex's ability to design
and deliver non-standard antenna products developed in recent years include: a
30-meter full-motion, high-speed, multi-feed antenna; a 20 meter
multi-frequency, extended broadband antenna; an antenna array wall chamber; and
an 11-meter mobile antenna.

CUSTOMER SERVICES. In addition to the manufacture and supply of a
broad line of telecommunication antennas and related products, the Company also
offers a wide range of related services, including consulting; design and
configuration; turnkey field installation; site testing and performance
analysis; and after-sale maintenance services.

MARKETING, SALES, AND CUSTOMERS

GENERAL. The Company's marketing strategy is to offer a complete
line of high-technology antenna products, rather than to market complete
communications systems. The Company believes that this approach enables Vertex
to satisfy the needs of systems integrators (companies which sell complete
communications systems, but do not manufacture antennas or the particular
antenna needed). This approach also enables the Company to sell antenna
products directly to end users (ultimate customers) who combine the antennas
and associated products with other systems components to form complete
communications systems. The Company markets and supports its products through
a distribution system comprised of a direct sales force, supplemented in
international markets by independent sales representatives. Vertex augments
these sales methods by advertising certain products in trade magazines and by
displaying certain products at trade shows. The marketing and sales activities
of the Company focus on domestic and international markets for commercial,
governmental, and military applications. Vertex's marketing plan contemplates
sales growth through increasing market share and continued development of new
markets for its products.

SALES. The Company maintains a direct sales force in the United
States and Germany, and a staffed sales office in England. In addition to
providing product and pricing information, Vertex's sales personnel provide
customers and potential customers value-added solutions and detailed
explanations of the benefits and advantages of the Company's products and
services as compared to those of its competitors. The Company's sales force
includes sales managers, engineers, sales representatives, and technical
support personnel. The Company's worldwide marketing and sales efforts are
directed and coordinated from its headquarters in Kilgore, Texas.

The Company believes that the rapidly evolving international market
will continue to be an important source of sales. The Company's international
sales are comprised of products manufactured in the United States and Germany,
and services performed on-site by its engineers and technical support
personnel. To enhance its foreign sales, the Company also engages the services
of foreign independent sales representatives to supplement its direct sales
force. These foreign sales representatives also offer products of other
manufacturers which are complementary to, but not competitive with, the
Company's products.

Sales to foreign customers involving products or services
originating in the United States are typically contracted for in U. S. dollars.
Foreign sales of products or services originating in Germany are

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usually conducted in the German mark. International sales are subject to
certain government controls and other risks, including export licensing,
currency exchange rate fluctuations, political instability, trade restrictions,
and changes in tariffs and freight rates. Should any of these factors prove
onerous or change in a material unfavorable manner, the Company's delivery or
completion of a sales contract could be adversely affected. To date, the
Company has not experienced any material difficulties related to these factors.

International sales accounted for 68%, 73%, and 63% of net sales in
1995, 1994, and 1993, respectively. Sales in Western Europe were 16%, 18%, and
23% of net sales in 1995, 1994, and 1993, respectively. Sales in the Far
Eastern countries amounted to 28%, 22%, and 14% of net sales in 1995, 1994, and
1993, respectively. Export sales were 64%, 63%, and 57% of net sales in 1995,
1994, and 1993, respectively.

CUSTOMERS. Typical users of the Company's products include the
broadcast industry, international telecommunications companies, communications
common carriers, universities, private communications networks, and government
agencies. The Company's customers include a number of major companies and
government agencies throughout the world, including certain agencies of the U.
S. Government and various foreign governments.

Although the Company sells its products to many customers, one
customer, Satellite Transmission Systems, Inc. ("STS"), and various agencies of
the U. S. Government (aggregated as one), have each accounted for 10% or more
of sales in any one of the past three fiscal years, except as otherwise
indicated in the following schedule.

<TABLE>
<CAPTION>
====================================================================================================
Percent of Total Net Sales
----------------------------------------------------------------------------------------------------
Customer 1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STS . . . . . . . . . . . . . . . . . . 16% 19% 21%
----------------------------------------------------------------------------------------------------
U. S. Government . . . . . . . . . . . Below 10% Below 10% 12%
====================================================================================================
</TABLE>

No other customer accounted for as much as 10% of the Company's net
sales in 1995, 1994, or 1993, respectively.

Vertex does not seek to maintain a specific level of sales to the
various agencies of the U. S. Government, but rather targets certain types of
projects where the Company's existing products and/or expertise will enable it
to submit competitive bid proposals. Accordingly, the Company does not attach
any particular significance to the fact that sales to these customers
(aggregated as one) have declined since 1993 as depicted in the table above.

The history of the Company's business reflects that, due to large
contracts which may occur from time to time, one or more different customers
may represent a material part of the Company's net sales or unfilled backlog of
orders in any given year or at any point in time. As an example, unfilled
order backlog to one customer, GTE Corporation, represented approximately 25%
of the Company's total unfilled order backlog at October 31, 1995 (due to over
$12 million of contract awards received from GTE in the fourth quarter of
fiscal 1995). The Company believes that its relationships with its customers
are excellent and that it will continue to be a major supplier of satellite
communications earth station antenna products to its major customers. In
addition, the Company has been successful in recent years in diversifying its
customer base by increasing its penetration of existing and emerging markets
and developing new markets for its products, and believes that it could
maintain sales of its products at current levels to other customers if current
relationships were interrupted. Although a large number of these relationships
has existed for multiple years, there can be

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no assurance that such relationships will continue. The loss of any of such
customers could have a material adverse effect on the Company and its business.

Most of the Company's business with the U. S. Government is on a
fixed-price basis. Contracts with the U. S. Government customarily include
provisions which provide for cancellation at the convenience of the Government.
In addition, upon cancellation by the Government, the Company would be entitled
to reimbursement of costs incurred, plus a pro rata share of profit. The
Company has never received a cancellation of a material Government contract and
has no reason to anticipate any such cancellation. Products sold,
characteristics, and business risks associated with U. S. Government business
do not differ materially from those associated with sales of the Company's
products to its commercial customers.

CUSTOMER SUPPORT AND SERVICE. The Company services, repairs, and
provides technical support for its products. Through its sales network and
design and support services, the Company is constantly made aware of customers'
needs and their use of its products and services. Accordingly, a superior level
of continuing customer service and support is integral to the Company's
objective of developing and maintaining long-term relationships with its
customers. The majority of the Company's service and support activities are
provided by its field engineering team, systems engineers, and sales and
administrative support personnel, both on-site at the customer's location and
by telephone.

FOREIGN OPERATIONS

In fiscal 1993, the Company organized its wholly-owned subsidiary,
Vertex Antennentechnik GmbH, headquartered in Duisburg, Germany, and acquired
through this subsidiary all of the assets and ongoing business of the Antenna
Group of Krupp Industrietechnik GmbH of Germany, effective December 31, 1992.
Financial information relating to these foreign operations for the past three
years is shown below:

<TABLE>
<CAPTION>
(In thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales to Unaffiliated Customers . . . . . . . . . . . . $3,724 $5,922 $3,417
Transfers between Geographic Areas . . . . . . . . . . . 889 1,059 21
Operating Income (Loss) . . . . . . . . . . . . . . . . (263) 1,186 107
Identifiable Assets . . . . . . . . . . . . . . . . . . . 2,366 4,002 3,482
</TABLE>

The Company translates the financial statements of its German
subsidiary from its functional currency, the German mark, into U. S. dollars in
accordance with applicable financial accounting standards. Assets and
liabilities are translated at the exchange rate in effect at each fiscal year
end. Sales and expenses are translated at the weighted average exchange rate in
effect for the period reported. Any resulting gains or losses are recorded in
shareholders' equity and excluded from net income.

MANUFACTURING AND ENGINEERING

The Company's products are manufactured from standard components
and parts that are either built by the Company or by other manufacturers
pursuant to the Company's specifications. Vertex considers these components
and related materials to be commercially available in sufficient volume in the
industry and expects to experience no difficulty in obtaining any materials or
components needed in its manufacturing activities. However, should any of these
materials or components become unavailable for a significant period, the result
could have an adverse effect on the Company's business.

The Company's products require substantial engineering, design, and
technical support. In addition, although many of the Company's products are
standardized, custom engineering is frequently required to accomplish the
antenna modifications necessary for a particular application or installation.
The Company's engineering staff is also important to its research and
development activities. The Company has been successful in attracting and
retaining well- qualified engineering personnel and does not anticipate a
shortage of qualified personnel in the future.

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The Company believes that its current manufacturing facilities
provide adequate manufacturing space for the foreseeable future. See Item 2 -
"Properties."

PRODUCT DEVELOPMENT

The Company's product research and development efforts are directed
primarily toward development, design, engineering, and implementation
activities rather than pure research. These activities are generally
undertaken in response to specific customer requests or anticipated
requirements of the U. S. Government for programs that have been identified by
the Company. Funding for these activities is derived from internally generated
sources and, from time to time, customers. For the years 1995, 1994, and 1993,
the Company expended $2,165,000, $2,637,000, and $2,203,000, respectively, on
research and development. Costs associated with product development work
funded by customers are included in the Company's cost of sales and the related
revenues are included in net sales. The Company strives to continually upgrade
its existing products and develop new products to meet changing customer
requirements and to keep pace with evolving technology in the industry.

COMPETITION

The Company experiences substantial competition from a number of
established companies which provide a broad range of products to the satellite
communications earth station antenna market, including Andrew Corporation,
Comsat RSI SatCom Technologies, and Scientific-Atlanta, Inc. Certain of these
companies have substantially greater financial and personnel resources than
those available to the Company. The Company's products may not be proprietary
or patentable, and may be subject to duplication and exploitation by its
competitors. Although many of these competitors offer antenna products which
are among the types or sizes produced by the Company, the Company believes that
no single competitor offers the diversity of antenna products produced by the
Company.

The Company believes that the most important competitive factors
are technical performance, capabilities, product performance, dependable
delivery, and price. Maintenance and service capabilities and manufacturing
experience in the industry are also important factors to a customer.
Accordingly, the Company strives to price its products competitively while
stressing its custom engineering and servicing capabilities based upon the
years of experience and technical expertise of its personnel in designing and
manufacturing antenna products and the Company's precision metal manufacturing
methods. The Company believes that its expertise in custom engineering and its
ability to meet customers' relatively short-lead time requirements provide it
with a distinct competitive advantage.

Due to competition in the industry where the Company competes,
periodic advances in technology can be expected. Therefore, the Company's
ability to maintain and improve in its existing markets and to enter new
markets is partially dependent upon its ability to evaluate advances in
technology and incorporate such advances where appropriate into its products in
a timely and effective manner.

INTELLECTUAL PROPERTY

The Company holds patents for certain products and processes. The
Company does not, however, consider patents important to its business but
instead relies principally upon innovative management, technical expertise, and
marketing skills to develop, enhance, and market its products. The Company
believes it is less dependent on the protection of proprietary product
information than on its ability to timely and effectively develop, enhance, and
market its products to maintain the competitiveness of its products with those
of others. The Company protects its proprietary product information through the
selective use of nondisclosure agreements with customers, suppliers, and
industry partners and by limiting access to sensitive information.

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<PAGE> 9
The Company has no reason to believe that its products and
proprietary rights infringe on the proprietary rights of any third parties.
There can be no assurance, however, that third parties will not assert
infringement claims in the future.

BACKLOG AND SEASONALITY

At October 31, 1995 and 1994, the Company's backlog of unfilled
orders believed to be firm was approximately $44 million and $31 million,
respectively. The backlog of unfilled orders at October 31, 1995, included
approximately $1.0 million of contracts with the U. S. Government. As is
customary, these contracts include provisions which allow for cancellation at
the convenience of the Government or prime contractor. Upon exercise of these
provisions, the Company would be entitled to reimbursement of costs incurred
and a pro rata share of profit. The Company has never received a cancellation
of a material government contract and believes no such event is threatened. The
Company expects that a substantial portion of the October 31, 1995, backlog
will be completed in fiscal year 1996.

The levels of net sales and net income of the Company fluctuate
moderately on a quarterly basis. The variability in recent years has been
demonstrated by typically higher net sales and net income in the fiscal
quarters ending in June and September of each fiscal year. The primary reason
for this pattern is the need for customers to complete installations during
warm weather months. The fiscal quarter ending in September can also be
affected by the timing of sales to U. S. Government agencies.

Other factors which have caused quarterly fluctuations in net sales
and net income include variability of shipments under large contracts and
variations in product mix and in profitability of individual orders. The
Company believes these aberrations may continue to have similar impact on
future results of operations, but their timing and placement within particular
quarterly periods on an ongoing basis cannot be predicted. Consequently, the
Company believes it is more meaningful to focus on annual rather than interim
results. In addition, due to the timing differences from year to year in the
receipt of large nonrecurring sales contracts, year-to-year comparisons of
backlog can be misleading and are not necessarily indicative of future
revenues.

ENVIRONMENTAL COMPLIANCE

Due to the nature of the Company's products, it has not been
materially affected to date by environmental laws. The Company does not
anticipate its business will be materially affected by any current or expected
environmental laws.

GOVERNMENT REGULATION

Although the Company is not directly regulated by any governmental
agency, most of its United States customers, and the telecommunications
industry in general, are subject to regulation by the Federal Communications
Commission (the "FCC"). In recent years, FCC decisions permitting greater
competition among common carriers have had a favorable impact on the Company.
In addition, the FCC controls the allocation of transmission frequencies and
the performance characteristics of earth station antennas. As a result of
these controls, the Company's antenna design specifications must conform on an
ongoing basis to meet FCC or other regulatory requirements. These regulations
are not expected to adversely affect the operations of the Company.

Outside the United States, where some of the customers of the
Company have been government owned and operated entities, changes in government
economic policy and communications regulation have affected in the past, and
may be expected to affect in the future, the volume of foreign business.
However, the effect of regulation in countries other than the United States in
which the Company does business has generally not been detrimental to the
international activities of the Company taken as a whole and is not expected to
be detrimental to such activities in the foreseeable future.

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<PAGE> 10
EMPLOYEES

As of October 31, 1995, the Company employed approximately 600
full-time employees.

None of the Company's employees is represented by a labor
organization and the Company is not a party to any collective bargaining
agreement. The Company has never had an employee strike or a work stoppage and
considers its relations with its employees to be good. The Company has not
experienced any difficulty in attracting and retaining qualified employees.

ITEM 2. PROPERTIES.

The Company owns and maintains executive and administrative offices
at its headquarters at 2600 N. Longview Street, Kilgore, Texas. The following
is a listing of the properties owned or leased by Vertex and its subsidiaries
as of October 31, 1995.

<TABLE>
<CAPTION>
Approximate Area Owned
Location Principal Use in Square Feet or Leased
-------- ------------- ---------------- ---------
<S> <C> <C> <C>
Kilgore, Texas Engineering, administrative, and 231,000 floor space on Owned in fee
manufacturing 55 acres of land

Longview, Texas Engineering, administrative, and 30,000 floor space Leased to
manufacturing October 1997

Torrance, California Engineering, administrative, and 37,000 floor space* Leased to
manufacturing June 1997

State College, Pa. Engineering, administrative, and 18,000 floor space Leased to March
manufacturing 1998

Duisburg, Germany Engineering and administrative 4,000 floor space Leased to
February 1996

Surrey, England Administrative 1,000 floor space Leased to
January 1996
</TABLE>

- -----------------------

* Approximately 15,000 square feet of the total floor space is
subleased to a third party.

The Company believes its facilities are adequate and will be
suitable to meet its requirements for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

The Company is not a party to any legal proceedings which would
have a material, adverse effect on the Company or its business and does not
believe that any such legal proceedings are threatened.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders of the
Company, through solicitation of proxies or otherwise.

-9-
<PAGE> 11
PART II

The information required by Items 5 through 8, inclusive, of this
report is contained in the Registrant's Annual Report to Shareholders for its
fiscal year ended September 30, 1995 (the "1995 Annual Report"), selected
portions of which are incorporated herein by reference, as described below.
With the exception of the material incorporated by reference herein, the 1995
Annual Report is not deemed filed as a part of this Annual Report on Form 10-K.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

The information appearing under the caption "Market for Common
Stock" on page 20 of the 1995 Annual Report is hereby incorporated herein by
reference.

ITEM 6. SELECTED FINANCIAL DATA.

The information appearing in the "Selected Financial Data" table
on page 1 of the 1995 Annual Report is hereby incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The information appearing under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 10 and 11 of the 1995 Annual Report is hereby incorporated herein by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Financial Statements of Vertex Communications
Corporation and Subsidiaries and Notes thereto, appearing on pages 12 through
19, inclusive, together with the Report of Arthur Andersen LLP, Independent
Public Accountants, thereon, appearing at page 20 of the 1995 Annual Report,
are hereby incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

-10-
<PAGE> 12
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS

The information regarding directors of the Registrant in response
to Item 7 of Schedule 14A promulgated pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"), which will appear in the Registrant's definitive
Proxy Statement in connection with the solicitation of proxies for its 1996
Annual Meeting of Shareholders, is hereby incorporated herein by reference.

EXECUTIVE OFFICERS

The following table sets forth the names and ages of all
executive officers of the Registrant, their respective positions and offices
with the Registrant, and the period during which each has served as an
executive officer.

<TABLE>
<CAPTION>
SERVED AS
EXECUTIVE
NAME AGE POSITION(S)(1) OFFICER SINCE
---- --- ----------- -------------
<S> <C> <C> <C>
J. Rex Vardeman . . . . . . . . . 56 Chairman of the Board, October, 1984
President, Chief Executive Officer
and Director

A. Don Branum . . . . . . . . . . 58 Senior Vice President, Assistant October, 1984
Secretary and Director of the
Company; and
Vice President/General Manager,
Vertex Antenna Division

James D. Carter . . . . . . . . . 48 Vice President-Finance, October, 1984
Treasurer and Director

Bill R. Womble(2) . . . . . . . . 57 Secretary and Director October, 1984

William L. Anton . . . . . . . . 57 Vice President of the Company; and December, 1984
Vice President - Marketing,
Vertex Antenna Division

Helmut E. Schwarz . . . . . . . . 54 Vice President of the Company; and December, 1984
Vice President/General Manager,
VISAT Division

H. Dean Bunnell . . . . . . . . . 48 Vice President of the Company; and January, 1995
President and Chief Executive
Officer, Maxtech, Inc.

Manfred Stupnik . . . . . . . . 53 Vice President of the Company; and January, 1995
President, Gamma-f Corp.
</TABLE>

- ---------------
(1) All executive officers of the Registrant are elected annually by the Board
of Directors and serve at the discretion of the Board. There are no family
relationships between any director or executive officer of the Registrant
and any other such person.

(2) Mr. Womble is not an employee of the Registrant.

-11-
<PAGE> 13
The following information, as furnished by each of the persons
named, relates to the business experience of each executive officer of the
Registrant named above.

J. Rex Vardeman is a co-founder of the Company and has served as
Chairman of the Board, President, Chief Executive Officer and a director since
its inception in October 1984. Prior to founding the Company, Mr. Vardeman
served as Vice President of Harris Antenna Operations ("Harris Antenna
Operations"), a unit of the Satellite Communications Division of Harris
Corporation ("Harris"), until the acquisition in 1984 of the Harris Antenna
Operations by the Company. In 1973, Mr. Vardeman co-founded Radio Mechanical
Structures, Inc. ("RMS"), the predecessor to the Harris Antenna Operations, and
served as its Vice President and General Manager and a director until the
acquisition of RMS by Harris in 1977. For more than ten years prior thereto,
he was employed by E-Systems, Inc., a major electronics company, in various
engineering and management positions.

A. Don Branum, a co-founder of the Company, has served as Senior
Vice President, Assistant Secretary, and a director since its inception in
October 1984 and as Vice President/General Manager of the Company's Vertex
Antenna Division since April 1994. Prior to joining the Company, Mr. Branum
served as Vice President of the Harris Antenna Operations, with responsibility
for product marketing. Mr. Branum served as President of Dallas
Telecommunications, Inc., a communications marketing and consulting firm which
he founded from 1981 through 1984. From 1978 through 1981, Mr. Branum served
as Vice President and General Manager of the Satellite Communications Division
of Harris, of which the Harris Antenna Operations were a part. Mr. Branum was
a co-founder of RMS in 1973 and served as its President and a director until
its acquisition by Harris in 1977.

James D. Carter has served the Company as Vice President - Finance
and Treasurer and a director since its inception in October 1984. Prior to
joining the Company, Mr. Carter was employed by Harris as Controller of the
Harris Antenna Operations since 1978. For more than six years prior thereto,
Mr. Carter was employed by Harris in various accounting positions.

Bill R. Womble has served as Secretary and a director of the
Company since October 1984. He has been continuously engaged in the private
practice of law since 1963 and is a member of the firm of Thompson & Knight,
P.C. (attorneys), Dallas, Texas. Mr. Womble is not an employee of the Company.

William L. Anton has served as Vice President of the Company since
October 1984 and as Vice President - Marketing of Vertex Antenna Division
since September 1995. Prior to appointment to his current positions, Mr. Anton
previously served in the position of Vice President - International Marketing
since 1987 and as Vice President - Operations from December 1984 through
October 1987. From April 1984 through December 1984 and from August 1977 until
April 1984, Mr. Anton served as Director of Operations and Program Director,
respectively, of the Harris Antenna Operations.

Helmut E. Schwarz has served as Vice President of the Company and
Vice President/General Manager of Vertex Integrated Satellite Antenna
Technology Division since September 1995. Prior thereto, Mr. Schwarz served as
Vice President - Engineering and Technology of the Company since joining the
Company in December 1984. Mr. Schwarz served for more than six years in various
senior engineering management positions with Harris, including Director of Feed
Production from July 1983 through December 1984.

H. Dean Bunnell has served as Vice President of the Company since
January 1995, immediately following the acquisition of Maxtech, Inc.
("Maxtech") as a wholly-owned subsidiary of the Company. Mr. Bunnell is a
co-founder of Maxtech and has served as its President and Chief Executive
Officer since its inception in 1989 and has continued to serve in such
positions since the Company's acquisition of Maxtech.

Manfred Stupnik has served as Vice President of the Company since
January 1995 and as President of Gamma-f Corp., a wholly-owned subsidiary of
the Company, since 1991. Prior thereto, Mr. Stupnik held

-12-
<PAGE> 14
positions as Vice President of Operations and Vice President-Commercial
Products during his 24 years of continuous tenure with Gamma-f Corp.

EMPLOYMENT AGREEMENTS

J. Rex Vardeman, A. Don Branum and James D. Carter, in their
capacities as (i) Chairman of the Board, President and Chief Executive Officer,
(ii) Senior Vice President, and (iii) Vice President - Finance and Treasurer of
the Company, respectively, have each executed employment agreements with the
Company. These employment agreements are each for three-year terms which
automatically renew on a daily basis.

Among other provisions, these agreements provide that, in
consideration for remaining in the employ of the Company, each officer is
entitled, subject to certain conditions, to receive benefits in the event of
termination of employment under certain circumstances, including, among other
reasons, a change of control of the Company. If such an officer is terminated
for a reason other than (a) his death, disability or retirement, (b) for cause,
or (c) his voluntary termination other than for good reason, such officer would
be entitled to receive from the Company, except as otherwise indicated below, a
lump-sum severance payment equal to the sum of the following payments: (i) the
officer's full base salary through the effective date of his termination at the
rate then in effect, (ii) any authorized but unreimbursed business expenses and
any vacation benefits which have accrued but are unpaid or unused as of the
effective date of termination, (iii) any accrued but unpaid annual bonus
compensation to the effective date of termination, but without accelerating the
bonus payment date, (iv) an amount equal to three times the average aggregate
direct annual compensation (salary and bonus) of the officer for the five
fiscal years of the Company ended immediately prior to the effective date of
his termination, and (v) in the event such officer is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), resulting from any "excess parachute payment" received by such officer
as described in Section 280G(b) of the Code, an amount sufficient to ensure
that after payment of such excise tax, plus interest or penalties thereon, if
any, as the result of such "excess parachute payment," such officer will retain
free and clear of all claims, taxes, and impositions an amount equal to such
excise tax, interest and penalties, if any, imposed upon the excess payment
received. In the event that any such officer receives a parachute payment as a
result of termination of employment, such officer would be deemed to receive an
"excess parachute payment" if it equals or exceeds 300% of the officer's "base
amount," generally the average annual compensation received by such officer
over the five most recent tax years. The "excess parachute payment" is computed
as that portion of the "parachute payment" which exceeds the "base amount."

COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT.

Section 16(a) of the Exchange Act requires the Registrant's
directors and officers, and persons who own more than 10% of a registered class
of the Registrant's equity securities, to file initial reports of ownership
and reports of changes in ownership of the Registrant's securities with the
Securities and Exchange Commission (the "Commission") on Forms 3, 4, or 5, as
applicable. Such persons are required by regulations promulgated by the
Commission pursuant to the Exchange Act to furnish the Registrant with copies
of all such Section 16(a) report forms they file with the Commission.

Based solely on its review of the copies of such report forms
received by it with respect to fiscal year 1995, or written representations
from certain reporting persons, the Registrant believes that all filing
requirements applicable to its directors, officers, and persons who own more
than 10% of a registered class of the Registrant's equity securities have been
timely complied with in accordance with Section 16(a) of the Exchange Act.

-13-
<PAGE> 15
ITEM 11. EXECUTIVE COMPENSATION.

The information regarding executive compensation in response to
Item 8 of Schedule 14A which will appear in the Registrant's definitive Proxy
Statement in connection with the solicitation of proxies for its 1996 Annual
Meeting of Shareholders is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information regarding security ownership of certain
beneficial owners and management in response to Item 6 of Schedule 14A which
will appear in the Registrant's definitive Proxy Statement in connection with
the solicitation of proxies for its 1996 Annual Meeting of Shareholders is
hereby incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information regarding certain relationships and related
transactions in response to Item 7 of Schedule 14A which will appear in the
Registrant's definitive Proxy Statement in connection with the solicitation of
proxies for its 1996 Annual Meeting of Shareholders is hereby incorporated
herein by reference.

-14-
<PAGE> 16
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
PAGE IN 1995
(a)1. CONSOLIDATED FINANCIAL STATEMENTS. ANNUAL REPORT
-------------
<S> <C> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . 20

Consolidated Statements of Income
For the years ended September 30,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Consolidated Balance Sheets
As of September 30, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 13

Consolidated Statements of Cash Flows
For the years ended September 30,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Consolidated Statements of Shareholders' Equity
For the years ended September 30,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 16

2. FINANCIAL STATEMENT SCHEDULES. PAGE NO.
--------

Report of Independent Public Accountants on Schedule . . . . . . . . . . . . . . . . S-1

SCHEDULE
--------

II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . S-2
</TABLE>

All other schedules are omitted because they are either not required
or not applicable or the required information is shown in the Consolidated
Financial Statements or Notes thereto.

(b) REPORTS ON FORM 8-K.

The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report, and none was required.

-15-
<PAGE> 17
(c) EXHIBITS.

The following Exhibits are filed herewith pursuant to Item 601 of
Regulation S-K or are incorporated herein by reference to previous filings as
noted, as applicable:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
3.1 . . Restated Articles of Incorporation of the Registrant filed as Exhibit 3-A to the
Registrant's Statement on Form S-18 (File No. 33-1094-FW).

3.2 . . Bylaws of the Registrant filed as Exhibit 3-B to the Registrant's Registration
Statement on Form S-18 (File No. 33-1094-FW).

3.3 . . Articles of Amendment to the Restated Articles of Incorporation of the Registrant
filed as Exhibit 3-C to the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1988 (File No. 0-15277).

3.4 . . Articles of Amendment to the Restated Articles of Incorporation, as amended, of the
Registrant.

3.5 . . First Amendment to the Bylaws of the Registrant filed as Exhibit 3-D to the
Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988
(File No. 0-15277).

3.6 . . Second Amendment to the Bylaws of the Registrant adopted October 29, 1991 filed as
Exhibit 3-E to the Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1991 (File No. 0-15277).

10.1 . . Savings/Profit Sharing Plan of the Registrant, as amended and restated, effective as
of June 1, 1991 filed as Exhibit 10-A to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1991 (File No. 0-15277).

10.2 . . Stock Option Plan for Key Employees of the Registrant filed as Exhibit A to the
Registrant's definitive Proxy Statement in connection with the solicitation of proxies
for its 1987 Annual Meeting of Shareholders (File No. 0-15277).

10.3 . . First Amendment to the Stock Option Plan for Key Employees filed as Exhibit 10-E to
the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30,
1988 (File No. 0-15277).

10.4 . . Second Amendment to the Stock Option Plan for Key Employees - Filed as Exhibit A to
the Registrant's definitive Proxy Statement in connection with the solicitation of
proxies for its 1992 Annual Meeting of Shareholders (File No. 0-15277).

10.5 . . 1995 Stock Compensation Plan of the Registrant filed as Exhibit A to the Registrant's
definitive Proxy Statement in connection with the solicitation of proxies for its 1995
Annual Meeting of Shareholders (File No. 0-15277).

10.6 . . Management Incentive Compensation Plan of the Registrant filed as Exhibit 10-F to the
Registrant's Registration Statement on Form S-18 (File No. 33-1094-FW).
</TABLE>

-16-
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.7 . . Qualified Employee Stock Purchase Plan of the Registrant filed as Exhibit 10-G to the
Registrant's Registration Statement on Form S-18 (File No. 33-1094-FW).

10.8 . . Outside Directors Stock Option Plan of the Registrant filed as Exhibit B to the
Registrant's definitive Proxy Statement in connection with the solicitation of proxies
for its 1987 Annual Meeting of Shareholders (File No. 0-15277).

10.9 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant
and J. Rex Vardeman, Chairman of the Board, President and Chief Executive Officer of
the Registrant.

10.10 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant
and A.Don Branum, Senior Vice President of the Registrant.

10.11 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant
and James D. Carter, Vice President - Finance and Treasurer of the Registrant.

10.12* . . Management Incentive Compensation Plan of the Registrant, as amended and restated
effective October 1, 1995.

10.13* . . Management Incentive Compensation Plan for Divisions of the Registrant, as amended and
restated effective October 1, 1995.

10.14* . . Management Incentive Compensation Plan of Gamma-f Corp., a wholly-owned subsidiary of
the Registrant, as amended and restated effective October 1, 1995.

10.15* . . Management Incentive Compensation Plan of Maxtech, Inc., a wholly-owned subsidiary of
the Registrant, as amended and restated effective October 1, 1995.

10.16* . . Employee Profit Sharing Bonus Plan of the Registrant, as amended and restated
effective October 1, 1995.

10.17* . . Employee Profit Sharing Bonus Plan of Gamma-f Corp., a wholly-owned subsidiary of the
Registrant, as amended and restated effective as of October 1, 1995.

10.18 . . Indemnification Agreement, dated October 26, 1994, by and between the Registrant and
J. Rex Vardeman; and schedule of other officers and directors of the Registrant, each
of whom has entered into a similar agreement with the Registrant.

11* . . Computation of Net Income Per Share.

13* . . Annual Report to Shareholders of the Registrant for the year ended September 30, 1995,
to the extent specified in Parts II, III and IV hereof.

22* . . Subsidiaries of the Registrant.

24* . . Consent of Independent Public Accountants.

27* . . Financial Data Schedule.
</TABLE>
- --------------------------
*Filed herewith.

-17-
<PAGE> 19
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Dated: December 18, 1995 Vertex Communications Corporation
(Registrant)

By: /s/ J. REX VARDEMAN
J. Rex Vardeman
Chairman of the Board, President
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. REX VARDEMAN Chairman of the Board, December 18, 1995
J. Rex Vardeman President, Chief
Executive Officer (Principal
Executive Officer) and
Director

/s/ A. DON BRANUM Director December 18, 1995
A. Don Branum

/s/ JAMES D. CARTER Vice President - Finance December 18, 1995
James D. Carter (Principal Financial and
Accounting Officer), Treasurer
and Director

/s/ BILL R. WOMBLE Director December 18, 1995
Bill R. Womble

/s/ DON R. HEITZMAN, SR Director December 18, 1995
Donald E. Heitzman, Sr.
</TABLE>

-18-
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SCHEDULE

To Vertex Communications Corporation:

We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Vertex
Communications Corporation's 1995 annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated October
27, 1995. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

Arthur Andersen LLP

Dallas, Texas
October 27, 1995

S-1
<PAGE> 21
(In thousands)

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGES TO CHARGES TO BALANCE
BEGINNING COST AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS

Year Ended 9/30/95 $263 $(22) $ -- $ -- $241
Year Ended 9/30/94 263 60 -- 60(1) 263
Year Ended 9/30/93 386 (55) -- 68(1) 263

ALLOWANCE FOR
INVENTORY OBSOLESCENCE

Year Ended 9/30/95 $451 $ (34) $ -- $ -- $417
Year Ended 9/30/94 330 121 -- -- 451
Year Ended 9/30/93 202 128 -- -- 330

ALLOWANCE FOR
WARRANTY CLAIMS

Year Ended 9/30/95 $460 $303 $ -- $172(2) $591
Year Ended 9/30/94 433 310 -- 283(2) 460
Year Ended 9/30/93 384 375 -- 326(2) 433
</TABLE>

(1) Doubtful accounts written off, less recoveries.
(2) Warranty claims processed.

S-2
<PAGE> 22
INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Number DESCRIPTION
- ------ -----------
<S> <C>
10.12 Management Incentive Compensation Plan of the Registrant, as amended and restated effective October 1,
1995.

10.13 Management Incentive Compensation Plan for Divisions of the Registrant, as amended and restated effective
October 1, 1995.

10.14 Management Incentive Compensation Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as
amended and restated effective October 1, 1995.

10.15 Management Incentive Compensation Plan of Maxtech, Inc., a wholly-owned subsidiary of the Registrant, as
amended and restated effective October 1, 1995.

10.16 Employee Profit Sharing Bonus Plan of the Registrant, as amended and restated effective October 1, 1995.

10.17 Employee Profit Sharing Bonus Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as
amended and restated effective as of October 1, 1995.

11 Computation of Net Income Per Share.

13 Annual Report to Shareholders of the Registrant for the year ended September 30, 1995, to the extent
specified in Parts II, III and IV hereof.

22 Subsidiaries of the Registrant.

24 Consent of Independent Public Accountants.

27 Financial Data Schedule.
</TABLE>

<PAGE> 1
Exhibit 10.12

MANAGEMENT INCENTIVE COMPENSATION PLAN
OF VERTEX COMMUNICATIONS CORPORATION
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995)

1. PURPOSE OF PLAN. This Management Incentive Compensation Plan
is intended to attract and retain key employees of outstanding competence and
to promote the growth and development of the Company by providing incentive
compensation as a reward to those officers, managers, and other key employees
who contribute by their ability, industry, and ingenuity to the management,
development, and successful operations of the Company.

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plan
of operations of the Company as approved by the Board of Directors for a
designated Fiscal Year.

"Annual Performance Objectives" - shall mean the financial
objectives of the Company which the Compensation Committee shall promulgate and
define as applicable for each Fiscal Year relative to various degrees of
achievement of Awards under the Plan at various levels of Net Income After Tax
achieved by the Company for such Fiscal Year and such other measurements of
financial accomplishment by the Company as it shall in its sole discretion
authorize and approve as conditions precedent to full realization by
Participants of Awards under the Plan, which Annual Performance Objectives
shall be communicated annually in a comprehensive memorandum from the
Compensation Committee to all Participants in the Plan.

"Award" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Board of Directors" - shall mean the Board of Directors of
the Company.

"Company" - shall mean Vertex Communications Corporation.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Employee" - shall mean a person who is in the regular
full-time employment of the Company as determined by the personnel policies and
practices of the Company.

"Fiscal Year" - shall mean the taxable year of the Company
ending September 30.

"Net Income After Tax" - shall mean for each Fiscal Year the
net income of the Company after federal and state taxes determined in
accordance with generally accepted accounting principles consistently applied
and as approved by the independent public accountants who have examined the
financial accounts and records of the Company for such Fiscal Year; provided,
however, that any such determination of the Net Income After Tax shall be
adjusted to include the effect of the amount of any Award paid or to be paid to
a Participant pursuant to the Plan.
<PAGE> 2
"Participant" - shall mean any Employee who is eligible to
receive an Award during a Fiscal Year, as designated and approved for such
Fiscal Year by the Compensation Committee.

"Plan" - shall mean the Management Incentive Compensation Plan
of the Company.

"Projected Net Income After Tax" - shall mean for each Fiscal
Year the level of Net Income After Tax projected and approved by the Board of
Directors to be achieved by the Company for such Fiscal Year pursuant to the
Annual Operating Plan for such Fiscal Year.

"Target Bonus Fund" - shall mean the target fund established
from time to time by the Board of Directors to fund the payment of the Awards
for a designated Fiscal Year hereunder.

3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Compensation Committee appointed by the Board of Directors. The
Compensation Committee shall consist of not less than two (2) members of the
Board of Directors. The Board of Directors may from time to time appoint
members of the Compensation Committee in substitution for or in addition to
members previously appointed and may fill vacancies, however caused, in the
Compensation Committee. The Compensation Committee shall select one of its
members as its Chairman and shall hold its meetings at such times and places as
it shall deem advisable.

A majority of the members of the Compensation Committee shall
constitute a quorum. All action of the Compensation Committee shall be taken
by a majority of its members. Any action may be taken by written instrument
signed by a majority of the members, and any action so taken shall be deemed
fully as effective as if it had been taken by a vote of the majority of the
members at the meeting duly called and held. The Compensation Committee may
appoint a Secretary, shall keep minutes of its meetings, and shall make such
rules and regulations for the conduct of its business as it shall deem
advisable.

All determinations, decisions, and directions made or given by
the Board of Directors or the Compensation Committee under the Plan shall be
final and conclusive. The decision of the Board of Directors or the
Compensation Committee on any question concerning or involving the
interpretation or administration of the Plan shall be final and conclusive, and
no provision of the Plan shall be deemed to give any Employee, his/her legal
representative or assigns, any right to participate in the Plan, except to such
extent, if any, as the Compensation Committee may have determined or approved
pursuant to the provisions of the Plan.

4. PARTICIPATION IN THE PLAN. During the existence of the Plan,
the Compensation Committee shall designate for each Fiscal Year the Employees
eligible to participate in the Plan for such Fiscal Year. The Compensation
Committee shall give consideration to the recommendations and suggestions
submitted to it by officers, managers, and department heads of the Company,
with respect to Employees who are mainly responsible in an executive,
administrative, professional, technical, or advisory capacity for the
management of the operations of the Company.
<PAGE> 3
5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the
commencement of each Fiscal Year, the Board of Directors shall determine the
Target Bonus Fund that will be available for payment of Awards for such Fiscal
Year, subject to the achievement and satisfaction of certain Annual Performance
Objectives by the Company for such Fiscal Year. Within thirty (30) days
thereafter, the Compensation Committee in its discretion shall determine the
amount of the targeted Award for each of the Participants in the Plan for such
Fiscal Year by determining the share of the Target Bonus Fund that each
Participant will be eligible to receive for such Fiscal Year, subject to the
terms of the Plan, including without limitation, compliance and satisfaction by
the Company with the Annual Performance Objectives established by the
Compensation Committee for such Fiscal Year and set forth in a comprehensive
memorandum from the Compensation Committee to the Participants of the Plan for
such Fiscal Year. The payment schedule will be delineated annually by the
Compensation Committee in a memo from the Chairman of the Compensation
Committee as soon as practical after the determination thereof. The
Compensation Committee shall notify each Participant of his/her selection to
participate in the Plan and the share of such Participant in and to the Target
Bonus Fund for such Fiscal Year, including the Annual Performance Objectives
applicable for such Fiscal Year.

6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days
after completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Award to be paid to each Participant for such
Fiscal Year. The amount of the Award of each Participant for each Fiscal Year
shall be determined by measuring (i) the actual Net Income After Tax achieved
for such Fiscal Year compared to the Projected Net Income After Tax reflected
in the Annual Operating Plan for such Fiscal Year and (ii) the degree of
accomplishment by the Company of the Annual Performance Objectives for such
Fiscal Year set forth in the comprehensive memorandum to Plan Participants
referred to in Section 5 hereof as related to the projected objectives
contained in the Annual Operating Plan for such Fiscal Year. The amount of
each Award thus determined shall be distributed by the Company to the
Participants as soon as practical after the determination thereof. Unless the
Participant has filed with the Company written instructions to the contrary,
any Award payable with respect to a deceased Participant shall be paid to such
Participant's surviving spouse, if any; otherwise, such Award shall be paid to
such Participant's estate.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Award for a Fiscal
Year, provided such Participant remains in the full-time employ of the Company
for such Fiscal Year. A Participant whose employment is terminated for any
reason shall forfeit participation in the Plan and shall not be entitled to any
Award for such Fiscal Year. Notwithstanding the preceding, in the event of the
death or permanent disability of a Participant during any Fiscal Year, the
Compensation Committee shall have the power and authority to determine whether
an Award should be paid to such Participant during any Fiscal Year. The
determination of the Compensation Committee in the exercise of such power and
authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

8. AMENDMENT OR TERMINATION. The Board of Directors may, from
time to time, amend, modify, change, suspend, or terminate, in whole or in
part, any or all of the provisions of the Plan, except that:

(a) No amendment, modification, change, suspension, or
termination may affect any right of any Participant to receive
Awards made to such Participant prior to the effective date of
such amendment, modification, change, suspension, or
termination; and,

(b) No amendment, modification, or change may withdraw the
obligation and right of interpretation and administration of
the Plan from the Compensation Committee.
<PAGE> 4
9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed
to give any Employee or his/her legal representative or assigns, or any other
person or entity claiming under or though the Employee, any contract or other
right to participate in the benefits of the Plan other than as expressly set
forth herein. Nothing in the Plan shall be construed as constituting a
commitment, guarantee, agreement, or understanding of any kind or nature that
the Company will continue to employ any individual (whether or not an Employee
or a Participant); nor shall the Plan affect in any way the right of the
Company to terminate the employment of any individual (whether or not an
Employee or a Participant) at any time.

10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to
such other rights of indemnification as they may have as members of the Board
of Directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal thereof, to which they or any of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit, or proceedings, except in relation to matters as to which it shall be
adjudged in such action, suit, or proceedings that such Compensation Committee
member is liable for negligence or misconduct in the performance of his/her
duties, provided that within thirty (30) days after institution of any such
action, suit, or proceedings a Compensation Committee member shall in writing
offer the Company the opportunity, at its own expense, to pursue and defend the
same.

11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and
restated) supersedes all prior management incentive compensation plans
applicable to the Company, and shall be effective commencing as of October 1,
1995, and shall remain in effect until terminated by the Board of Directors.

Executed this 26th day of September, 1995.

VERTEX COMMUNICATIONS CORPORATION

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, President
ATTEST:

By: /s/ Bill R. Womble
BILL R. WOMBLE, Secretary

<PAGE> 1
Exhibit 10.13

MANAGEMENT INCENTIVE COMPENSATION PLAN
FOR DIVISIONS OF
VERTEX COMMUNICATIONS CORPORATION
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995)

1. PURPOSE OF PLAN. This Management Incentive Compensation Plan
is intended to attract and retain key employees of outstanding competence and
to promote the growth and development of the Divisions by providing incentive
compensation as a reward to those officers, managers, and other key employees
who contribute by their ability, industry, and ingenuity to the management,
development, and successful operations of the Divisions.

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plan
of operations of a Division, as approved for such Division by the Board of
Directors for a designated Fiscal Year.

"Annual Performance Objectives" - shall mean the financial
objectives of the respective Division which the Compensation Committee shall
promulgate and define as applicable for each Division for each Fiscal Year
relative to various degrees of achievement of Awards under the Plan at various
levels of Pretax Income achieved by the respective Divisions for such Fiscal
Year and such other measurements of financial accomplishment by the Divisions,
respectively, as it shall in its sole discretion authorize and approve as
conditions precedent to full realization by Participants of Awards under the
Plan, which Annual Performance Objectives shall be communicated annually in a
comprehensive memorandum from the Compensation Committee to all Participants in
the Plan.

"Award" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Board of Directors" - shall mean the Board of Directors of
the Company.

"Company - shall mean Vertex Communications Corporation.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Division" - shall mean a Division of the Company including
Vertex Antenna Division, Vertex Controls Systems Division, Vertex Integrated
Satellite Antenna Technology Division, and any other Division of the Company to
which this Plan shall become hereafter applicable by action of the Board of
Directors.

"Employee" - shall mean a person who is in the regular
full-time employment of a Division as determined by the personnel policies and
practices of such Division.

"Fiscal Year" - shall mean the taxable year of the Division
ending September 30.
<PAGE> 2
"Participant" - shall mean any Employee who is eligible to
receive an Award during a Fiscal Year, as designated and approved for such
Fiscal Year by the Compensation Committee.

"Plan" - shall mean the Management Incentive Compensation Plan
for the Divisions of Vertex Communications Corporation.

"Pretax Income" - shall mean for each Fiscal Year the net
income of each Division before federal and state taxes determined in accordance
with generally accepted accounting principles consistently applied and as
approved by the independent public accountants who have examined the financial
accounts and records of each Division for such Fiscal Year; provided, however,
that such Pretax Income determination shall be adjusted to include the effect
of the amount of any Award paid or to be paid to a Participant pursuant to the
Plan.

"Projected Pretax Income" - shall mean for each Fiscal Year
the level of Pretax Income projected and approved by the Board of Directors to
be achieved by the Divisions, respectively, for such Fiscal Year pursuant to
the Annual Operating Plan as related to such Divisions, respectively, for such
Fiscal Year.

"Target Bonus Fund" - shall mean the target fund established
from time to time by the Board of Directors for each Division, respectively, to
fund the payment of the Awards to Employees of such Division for a designated
Fiscal Year hereunder.

All determinations, decisions, and directions made or given by
the Board of Directors or the Compensation Committee under the Plan shall be
final and conclusive. The decision of the Board of Directors or the
Compensation Committee on any question concerning or involving the
interpretation or administration of the Plan shall be final and conclusive, and
no provision of the Plan shall be deemed to give any Employee, his/her legal
representative or assigns, any right to participate in the Plan, except to
<PAGE> 3
such extent, if any, as the Compensation Committee may have determined or
approved pursuant to the provisions of the Plan.

4. PARTICIPATION IN THE PLAN. During the existence of the Plan,
the Compensation Committee shall designate for each Fiscal Year the Employees
of each Division who shall be eligible to participate in the Plan for such
Fiscal Year. The Compensation Committee shall give consideration to the
recommendations and suggestions submitted to it by officers, managers, and
department heads of the respective Divisions, with respect to Employees of each
such Division who are mainly responsible in an executive, administrative,
professional, technical, or advisory capacity for the management of the
operations of the Divisions.

5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the
commencement of each Fiscal Year, the Board of Directors shall determine the
Target Bonus Fund for each Division that will be available for payment of
Awards to employees of each such Division for such Fiscal Year. Within thirty
(30) days thereafter, the Compensation Committee in its discretion shall
determine the amount of the targeted Award for each of the Participants in the
Plan for such Fiscal Year by determining the share of the Target Bonus Fund
applicable to each Participant that each such Participant will be eligible to
receive for such Fiscal Year, subject to the terms of the Plan, including,
without limitation, compliance and satisfaction by the respective Divisions
with the Annual Performance Objectives established by the Compensation
Committee for each such Division for such Fiscal Year and set forth in a
comprehensive memorandum from the Compensation Committee to the Participants of
the Plan for such Fiscal Year. The payment schedule will be delineated
annually by the Compensation Committee in a memo from the Chairman of the
Compensation Committee to the Vice President/General Manager of each Division
as soon as practical after the determination thereof. The Compensation
Committee, through the Vice President/General Manager of each Division, shall
notify each Participant of his/her selection to participate in the Plan and the
share of each such Participant in and to the Target Bonus Fund applicable to
the Division which employs or employed such Participant for such Fiscal Year,
including the Annual Performance Objectives applicable for such Fiscal Year.

6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days
after completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Award to be paid to each Participant for such
Fiscal Year. The amount of the Award of each Participant employed by a
particular Division for each Fiscal Year shall be determined by measuring (i)
the actual Pretax Income achieved by such Division for such Fiscal Year
compared to the Projected Pretax Income of such Division reflected in the
Annual Operating Plan for such Fiscal Year and (ii) the degree of
accomplishment by each respective Division of the Annual Performance Objectives
for each such Division for such Fiscal Year set forth in a comprehensive
memorandum to Plan Participants referred to in Section 5 hereof as related to
the projected objectives for each Division as contained in the Annual Operating
Plan for each such Division for such Fiscal Year. The amounts of each Award
thus determined shall be distributed by the Division to the Participants as
soon as practical after the determination thereof. Unless the Participant has
filed with the Division written instructions to the contrary, any Award payable
with respect to a deceased Participant shall be paid to such Participant's
surviving spouse, if any; otherwise, such Award shall be paid to such
Participant's estate.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Award for a Fiscal
Year, provided such Participant remains in the full-time employ of the Division
for such Fiscal Year. A Participant whose employment is terminated for any
reason shall forfeit participation in the Plan and shall not be entitled to any
Award for such Fiscal Year. Notwithstanding the preceding, in the event of the
death or permanent disability of a Participant during any Fiscal Year, the
Compensation Committee shall have the power and authority to determine whether
an
<PAGE> 4
Award should be paid to such Participant for such Fiscal Year. The
determination of the Compensation Committee in the exercise of such power and
authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

8. AMENDMENT OR TERMINATION. The Board of Directors may, from
time to time, amend, modify, change, suspend, or terminate, in whole or in
part, any or all of the provisions of the Plan, except that:

(b) No amendment, modification, or change may withdraw the
obligation and right of interpretation and administration of
the Plan from the Compensation Committee.

9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed
to give any Employee or his/her legal representative or assigns, or any other
person or entity claiming under or though the Employee, any contract or other
right to participate in the benefits of the Plan other than as expressly set
forth herein. Nothing in the Plan shall be construed as constituting a
commitment, guarantee, agreement, or understanding of any kind or nature that
the Division will continue to employ any individual (whether or not an Employee
or a Participant); nor shall the Plan affect in any way the right of the
Division to terminate the employment of any individual (whether or not an
Employee or a Participant) at any time.

11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and
restated) supersedes all prior management incentive compensation plans
applicable to Divisions of the Company, and shall be effective commencing as of
October 1, 1995, and shall remain in effect until terminated by the Board of
Directors.

Executed this 26th day of September, 1995.

VERTEX COMMUNICATIONS CORPORATION

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, President
ATTEST:

By: /s/ Bill R. Womble
BILL R. WOMBLE, Secretary

<PAGE> 1
Exhibit 10.14

MANAGEMENT INCENTIVE COMPENSATION PLAN
OF
GAMMA-F CORP
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995)

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plan
of operations of the Company as approved by the Board of Directors for a
designated Fiscal Year.

"Annual Performance Objectives" - shall mean the financial
objectives of the Company which the Compensation Committee shall promulgate and
define as applicable for each Fiscal Year relative to various degrees of
achievement of Awards under the Plan at various levels of Pretax Income
achieved by the Company for such Fiscal Year and such other measurements of
financial accomplishment by the Company as it shall in its sole discretion
authorize and approve as conditions precedent to full realization by
Participants of Awards under the Plan, which Annual Performance Objectives
shall be communicated annually in a comprehensive memorandum from the
Compensation Committee to all Participants in the Plan.

"Award" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Board of Directors" - shall mean the Board of Directors of
Vertex Communications Corporation, the corporate parent of the Company, unless
otherwise clearly indicated.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Company" - shall mean Gamma-f Corp., a Subsidiary of Vertex
Communications Corporation (Vertex).

"Employee" - shall mean a person who is in the regular
full-time employment of the Company as determined by the personnel policies and
practices of the Company.

"Fiscal Year" - shall mean the taxable year of the Company
ending September 30.

"Participant" - shall mean any Employee who is eligible to
receive an Award during a Fiscal Year, as designated and approved for such
Fiscal Year by the Compensation Committee.

"Plan" - shall mean the Management Incentive Compensation Plan
of the Company.
<PAGE> 2
"Pretax Income" - shall mean for each Fiscal Year the net
income of the Company before federal and state taxes determined in accordance
with generally accepted accounting principles consistently applied and as
approved by the independent public accountants who have examined the financial
accounts and records of the Company for such Fiscal Year; provided, however,
that such Pretax Income determination shall be adjusted to include the effect
of the amount of any Award paid or to be paid to a Participant pursuant to the
Plan.

"Projected Pretax Income" - shall mean for each Fiscal Year
the level of Pretax Income projected and approved by the Board of Directors to
be achieved by the Company for such Fiscal Year pursuant to the Annual
Operating Plan for such Fiscal Year.

"Target Bonus Fund" - shall mean the target fund established
from time to time by the Board of Directors to fund the payment of the Awards
for a designated Fiscal Year hereunder.

All determinations, decisions, and directions made or given by
the Board of Directors or the Compensation Committee under the Plan shall be
final and conclusive. The decision of the Board of Directors or the
Compensation Committee on any question concerning or involving the
interpretation or administration of the Plan shall be final and conclusive, and
no provisions of the Plan shall be deemed to give any Employee, his/her legal
representative or assigns, any right to participate in the Plan, except to such
extent, if any, as the Compensation Committee may have determined or approved
pursuant to the provisions of the Plan.

4. PARTICIPATION IN THE PLAN. During the existence of the Plan,
the Compensation Committee shall designate for each Fiscal Year the Employees
eligible to participate in the Plan for such Fiscal Year. The Compensation
Committee shall give consideration to the recommendations and suggestions
submitted to it by officers, managers, and department heads of the Company,
with respect to Employees who are mainly responsible in an executive,
administrative, professional, technical, or advisory capacity for the
management of the operations of the Company.
<PAGE> 3
5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the
commencement of each Fiscal Year, the Board of Directors shall determine the
Target Bonus Fund that will be available for payment of Awards for such Fiscal
Year, subject to the achievement and satisfaction of certain Annual Performance
Objectives by the Company for such Fiscal Year. Within thirty (30) days
thereafter, the Compensation Committee in its discretion shall determine the
amount of the targeted Award for each of the Participants in the Plan for such
Fiscal Year by determining the share of the Target Bonus Fund that each
Participant will be eligible to receive for such Fiscal Year, subject to the
terms of the Plan, including, without limitation, compliance and satisfaction
by the Company with the Annual Performance Objectives established by the
Compensation Committee for such Fiscal Year and set forth in a comprehensive
memorandum from the Compensation Committee to the Participants of the Plan for
such Fiscal Year. The payment schedule will be delineated annually by the
Compensation Committee in a memo from the Chairman of the Compensation
Committee to the President of the Company as soon as practical after the
determination thereof. The Compensation Committee, through the President of
the Company, shall notify each Participant of his/her selection to participate
in the Plan and the share of such Participant in and to the Target Bonus Fund
for such Fiscal Year, including the Annual Performance Objectives applicable
for such Fiscal Year.

6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days
after completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Award to be paid to each Participant for such
Fiscal Year. The amount of the Award of each Participant for each Fiscal Year
shall be determined by measuring (i) the actual Pretax Income achieved for such
Fiscal Year compared to the Projected Pretax Income reflected in the Annual
Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by
the Company of the Annual Performance Objectives for such Fiscal Year set forth
in the comprehensive memorandum to the Plan Participants referred to in Section
5 hereof as related to the projected objectives contained in the Annual
Operating Plan for such Fiscal Year. The amount of each Award thus determined
shall be distributed by the Company to the Participants as soon as practical
after the determination thereof. Unless the Participant has filed with the
Company written instructions to the contrary, any Award payable with respect to
a deceased Participant shall be paid to such Participant's surviving spouse, if
any; otherwise, such Award shall be paid to such Participant's estate.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Award for a Fiscal
Year, provided such Participant remains in the full-time employ of the Company
for such Fiscal Year. A Participant whose employment is terminated for any
reason shall forfeit his/her participation in the Plan and shall not be
entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in
the event of the death or permanent disability of a Participant during any
Fiscal Year, the Compensation Committee shall have the power and authority to
determine whether an Award should be paid to such Participant for such Fiscal
Year. The determination of the Compensation Committee in the exercise of such
power and authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

8. AMENDMENT OR TERMINATION. The Board of Directors of the
Company may, from time to time, amend, modify, change, suspend, or terminate,
in whole or in part, any or all of the provisions of the Plan, except that:

10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to
such other rights of indemnification as they may have as members of the Board
of Directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company and Vertex against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal thereof, to which they or any of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company and Vertex) or paid by them in satisfaction of a judgment in any
such action, suit, or proceedings, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceedings that such Compensation
Committee member is liable for negligence or misconduct in the performance of
his/her duties, provided that within thirty (30) days after institution of any
such action, suit, or proceedings a Compensation Committee member shall in
writing offer Vertex the opportunity, at its own expense, to pursue and defend
the same.

Executed this 26th day of September, 1995.

GAMMA-f CORP

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, Chairman of the Board
ATTEST:

By: /s/ Joe A. Ylitalo
JOE A. YLITALO, Secretary

<PAGE> 1
Exhibit 10.15

MANAGEMENT INCENTIVE COMPENSATION PLAN
OF
MAXTECH, INC.

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plan
of operations of the Company as approved by the Board of Directors for a
designated Fiscal Year.

"Annual Performance Objectives" - shall mean the financial
objectives of the Company which the Compensation Committee shall promulgate and
define as applicable for each Fiscal Year relative to various degrees of
achievement of Awards under the Plan at various levels of Pretax Income
achieved by the Company for such Fiscal Year and such other measurements of
financial accomplishment by the Company as it shall in its sole discretion
authorize and approve as conditions precedent to full realization by
Participants of Awards under the Plan, which Annual Performance Objectives
shall be communicated annually in a comprehensive memorandum from the
Compensation Committee to all Participants in the Plan.

"Award" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Board of Directors" - shall mean the Board of Directors of
Vertex Communications Corporation, the corporate parent of the Company, unless
otherwise clearly indicated.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Company" - shall mean MAXTECH, Inc., a Subsidiary of Vertex
Communications Corporation (Vertex).

"Employee" - shall mean a person who is in the regular
full-time employment of the Company as determined by the personnel policies and
practices of the Company.

"Fiscal Year" - shall mean the taxable year of the Company
ending September 30.

"Participant" - shall mean any Employee who is eligible to
receive an Award during a Fiscal Year, as designated and approved for such
Fiscal Year by the Compensation Committee.

"Target Bonus Fund" - shall mean the target fund established
from time to time by the Board of Directors to fund the payment of the Awards
for a designated Fiscal Year hereunder.

The Compensation Committee shall have the sole authority and
power, subject to the express provisions and limitations of the Plan, to
construe the Plan and to adopt, prescribe, amend, and rescind rules and
regulations relating to the Plan, and to make all determinations necessary or
advisable for administering the Plan. No member of the Board of Directors or
the Compensation Committee shall be liable for any action or determination made
in good faith with respect to the Plan.
All determinations, decisions, and directions made or given by
the Board of Directors or the Compensation Committee under the Plan shall be
final and conclusive. The decision of the Board of Directors or the
Compensation Committee on any question concerning or involving the
interpretation or administration of the Plan shall be final and conclusive, and
no provisions of the Plan shall be deemed to give any Employee, his/her legal
representative or assigns, any right to participate in the Plan except to such
extent, if any, as the Compensation Committee may have determined or approved
pursuant to the provisions of the Plan.

4. PARTICIPATION IN THE PLAN. During the existence of the Plan,
the Compensation Committee shall designate for each Fiscal Year the Employees
eligible to participate in the Plan for such Fiscal Year. The Compensation
Committee shall give consideration to the recommendations and suggestions
submitted to it by officers, managers, and department heads of the Company,
with respect to Employees who are mainly responsible in an executive,
administrative, professional, technical, or advisory capacity for the
management of the operations of the Company.
<PAGE> 3
5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the
commencement of each Fiscal Year, the Board of Directors shall determine the
Target Bonus Fund that will be available for payment of Awards for such Fiscal
Year, subject to the achievement and satisfaction of certain Annual Performance
Objectives by the Company for such Fiscal Year. Within thirty (30) days
thereafter, the Compensation Committee in its discretion shall determine the
amount of the targeted Award for each of the Participants in the Plan for such
Fiscal Year by determining the share of the Target Bonus Fund that each
Participant will be eligible to receive for such Fiscal Year, subject to the
terms of the Plan, including, without limitation, compliance and satisfaction
by the Company with the Annual Performance Objectives established by the
Compensation Committee for such Fiscal Year and set forth in a comprehensive
memorandum from the Compensation Committee to the Participants of the Plan for
such Fiscal Year. The payment schedule will be delineated annually by the
Compensation Committee in a memo from the Chairman of the Compensation
Committee to the President of the Company as soon as practical after the
determination thereof. The Compensation Committee, through the President of
the Company, shall notify each Participant of his/her selection to participate
in the Plan and the share of such Participant in and to the Target Bonus Fund
for such Fiscal Year, including the Annual Performance Objectives applicable
for such Fiscal Year.

6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days
after completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Award to be paid to each Participant for such
Fiscal Year. The amount of the Award of each Participant for each Fiscal Year
shall be determined by measuring (i) the actual Pretax Income achieved for such
Fiscal Year compared to the Projected Pretax Income reflected in the Annual
Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by
the Company of the Annual Performance Objectives for such Fiscal Year set forth
in the comprehensive memorandum to the Plan Participants referred to in Section
5 hereof as related to the projected objectives contained in the Annual
Operating Plan for such Fiscal Year. The amount of each Award thus determined
shall be distributed by the Company to the Participants as soon as practical
after the determination thereof. Unless the Participant has filed with the
Company written instructions to the contrary, any Award payable, with respect
to a deceased Participant, shall be paid to such Participant's surviving
spouse, if any; otherwise, such Award shall be paid to such Participant's
estate.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Award for a Fiscal
Year, provided such Participant remains in the full-time employ of the Company
for such Fiscal Year. A Participant whose employment is terminated for any
reason shall forfeit his/her participation in the Plan and shall not be
entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in
the event of the death or permanent disability of a Participant during any
Fiscal Year, the Compensation Committee shall have the power and authority to
determine whether an Award should be paid to such Participant for such Fiscal
Year. The determination of the Compensation Committee in the exercise of such
power and authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to
such other rights of indemnification as they may have as members of the Board
of Directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company and Vertex against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal thereof, to which they or any of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company and Vertex) or paid by them in satisfaction of a judgment in any
such action, suit, or proceedings, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceedings that such Compensation
Committee member is liable for negligence or misconduct in the performance of
his/her duties, provided that within thirty (30) days after institution of any
such action, suit, or proceedings a Compensation Committee member shall in
writing offer Vertex the opportunity, at its own expense, to pursue and defend
the same.

11. EFFECTIVE DATE AND TERM. This Plan shall be effective
commencing as of October 1, 1995, and shall remain in effect until terminated
by the Board of Directors of the Company.

Executed this 26th day of September, 1995.

MAXTECH, INC.

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, Chairman of the Board
ATTEST:

By: /s/ James D. Carter
JAMES D. CARTER, Secretary

<PAGE> 1
Exhibit 10.16

EMPLOYEE PROFIT SHARING BONUS PLAN
OF
VERTEX COMMUNICATIONS CORPORATION
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995)

1. PURPOSE OF PLAN. The Employee Profit Sharing Bonus Plan is
intended to promote the growth and development of the Company by providing
bonus compensation as a reward to those employees who contribute by their
ability, industry, and longevity to the growth, development, and profitability
of the Company.

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plan
of operations of the Company or each of its Divisions, as applicable, as
approved by the Board of Directors for a designated Fiscal Year.

"Board of Directors" - shall mean the Board of Directors of
Vertex Communications Corporation.

"Bonus" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Bonus Fund" - shall mean the targeted amount established each
Fiscal Year for the Company and each of its Divisions by the Board of Directors
to fund the payment of the Bonuses for such Fiscal Year hereunder.

"Bonus Share" - shall mean the share of the Bonus Fund
allotted to each Participant in accordance with the provisions of the Plan.

"Company" - shall mean Vertex Communications Corporation.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Division" - shall mean any Division of the Company, including
Vertex Antenna Division, Vertex Control Systems Division, and Vertex Integrated
Satellite Antenna Technology Division, and any other Division of the Company to
which this Plan shall hereafter become applicable by action of the Board of
Directors..

"Employee" - shall mean a person who is in the regular
full-time employment of the Company or a Division as determined by the
personnel policies and practices of the Company or such Division for the entire
Fiscal Year applicable to the Plan, except, however, any such person who is an
officer or director of the Company or a participant pursuant to the Management
Incentive Compensation Plan of the Company or a Division thereof for such
Fiscal Year.
<PAGE> 2
"Fiscal Year" - shall mean the taxable year of the Company or
its Divisions, as applicable, ending September 30.

"Participant" - shall mean any employee who is eligible to
receive a Bonus during the Fiscal Year.

"Plan" - shall mean the Employee Profit Sharing Bonus Plan of
the Company and its Divisions as amended and restated effective as of October
1, 1995.

"Pretax Income" - shall mean for each Fiscal Year the net
incomes of the Company or such Division, as applicable, before federal and
state taxes determined in accordance with generally accepted accounting
principles consistently applied and as approved by the independent public
accountants who have examined the financial accounts and records of the Company
and each of its Divisions for such Fiscal Year; provided, however, that such
Pretax Income determination shall be adjusted to include the effect of the
amount of any Bonus paid or to be paid to a Participant pursuant to the Plan.

"Projected Pretax Income" - shall mean for each Fiscal Year
the level of Pretax Income projected and approved by the Board of Directors to
be achieved by the Company and each of its Divisions, respectively, for such
Fiscal Year pursuant to the Annual Operating Plan as related to the Company or
its appropriate Divisions, as applicable, for such Fiscal Year.

5. DETERMINATION OF THE BONUS FUND. Prior to the commencement of
each Fiscal Year, the Board of Directors shall determine the Projected Pretax
Income of the Company and each Division, respectively, for such Fiscal Year and
the amount of the Bonus Share of each Participant in and to the Bonus Fund for
such Fiscal Year, subject to the terms of the Plan. Within thirty (30) days
thereafter, the Compensation Committee shall determine the Bonus Share of the
Bonus Fund to be allocated to each Participant for such Fiscal Year pursuant to
the following procedures:

Step One:
The aggregate number of years of employment service of each
Participant with the Company or the Division, as applicable,
shall be multiplied by the hourly rate of compensation of each
such Participant on October 1 of such Fiscal Year.

Step Two:
The mathematical products thus determined in Step One above
for all Participants employed by the Company or Division, as
applicable, shall be aggregate in a total sum.

Step Three:
The quotient (expressed as a percentage) obtained by dividing
the amount determined in Step One above as to each Participant
by the aggregate amount determined in Step Two above shall
constitute the Bonus Share of each respective Participant in
and to the Bonus Fund for such Fiscal Year.

Step Four:
The amount of the Bonus Share of each Participant (expressed
in dollars) in and to the Bonus Fund for each Fiscal Year
shall be determined by multiplying the bonus Fund for such
Fiscal Year applicable to the Company or Division, as
appropriate, by the quotient obtained in Step Three above as
to such Participant.

Adjustments:
In the event the Pretax Income actually achieved by the
Company or Division, as applicable, for a Fiscal Year is less
than the Projected Pretax Income for the Company or such
Division, as applicable, pursuant to the Annual Operating Plan
for such Fiscal Year, the amounts of the Bonus Fund and the
respective Bonum Shares of the Participants for such Fiscal
Year shall each be decreased proportionately by the percentage
decrease represented by the amount such Pretax Income achieved
is less than such Projected Pretax Income for such Fiscal
Year. Conversely, in the event the Pretax Income actually
achieved by the Company or Division, as applicable, for a
Fiscal Year is more than the Projected Pretax Income for the
Company or such Division, as applicable, pursuant to the
Annual Operating Plan for such Fiscal Year, the amounts of the
Bonus Fund and the respective Bonus Shares of the Participants
for such Fiscal Year shall each be increased proportionately
by the percentage increase represented by the amount such
Pretax Income achieved exceeds such Projected Pretax Income
for such Fiscal Year.

The Compensation Committee shall notify each Participant in
the Plan of his/her Bonus Share for such Fiscal Year as soon as practical after
the projected amount thereof has been determined in accordance with the
provisions of the Plan.
<PAGE> 4
6. AWARD OF BONUS COMPENSATION. Within sixty (60) days after
completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Bonus to be paid to each Participant for such
Fiscal Year by dividing the audited Pretax Income of the Company or Division,
as applicable, actually achieved by the Projected Pretax Income of the Company
or Division, as applicable, for such Fiscal Year as determined by the Board of
Directors pursuant to the Annual Operating Plan for such Fiscal Year for each
entity, respectively. The percentage thus determined shall then be multiplied
by each Participant's approved Bonus Share to determine individual Bonuses
payable to Participants for such Fiscal Year. The amount of bonus compensation
thus determined shall be distributed by the Company and each Division, as
applicable, to the Participants within sixty (60) days following the close of
such Fiscal Year.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Bonus for a Fiscal
Year, provided such Participant remains in the full-time employ of the Company
or the Division, as applicable, for such entire Fiscal Year. A Participant
whose employment is terminated for any reason shall forfeit his/her
participation in the Plan and shall not be entitled to any Bonus for such
Fiscal Year. Notwithstanding the preceding, in the event of the death,
retirement, permanent disability, or any extended absence of a Participant, the
Compensation Committee shall have the power and authority to determine whether
an award should be paid to such Participant for such Fiscal Year. The
determination of the Compensation Committee in the exercise of such power and
authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

8. AMENDMENT OR TERMINATION. The Board of Directors may, from
time to time, amend, modify, change, suspend, or terminate, in whole or in
part, any or all of the provisions of the Plan, except that:

(a) No amendment, modification, change, suspension, or
termination may affect any right of any Participant to receive
a Bonus made to him/her prior to the effective date of such
amendment, modification, change, suspension, or termination;
and,

(b) No amendment, modification, or change may withdraw the
obligation and right of interpretation and administration of
the Plan from the Compensation Committee.

9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed
to give any Employee or his/her legal representative or assigns, or any other
person or entity claiming under or though him/her, any contract or other right
to participate in the benefits of the Plan other than as expressly set forth
herein. Nothing in the Plan shall be construed as constituting a commitment,
guarantee, agreement, or understanding of any kind or nature that the Company
or any Division will continue to employ any individual (whether or not an
Employee or a Participant); nor shall the Plan affect in any way the right of
the Company or its Divisions to terminate the employment of any individual
(whether or not an Employee or a Participant) at any time.

10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to
such other rights of indemnification as they may have as members of the Board
of Directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal thereof, to which they or any of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in
<PAGE> 5
satisfaction of a judgment in any such action, suit, or proceedings, except in
relation to matters as to which it shall be adjudged in such action, suit, or
proceedings that such Compensation Committee member is liable for negligence or
misconduct in the performance of his/her duties, provided that within thirty
(30) days after institution of any such action, suit, or proceedings a
Compensation Committee member shall in writing offer the Company the
opportunity, at its own expense, to pursue and defend the same.

11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and
restated) supersedes all prior employee profit sharing bonus plans of the
Company or a respective Division, and shall be effective commencing as of
October 1, 1995, and shall remain in effect until terminated by the Board of
Directors.

Executed this 26th day of September, 1995.

VERTEX COMMUNICATIONS CORPORATION

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, President
ATTEST:

By: /s/ Bill R. Womble
BILL R. WOMBLE, Secretary

<PAGE> 1
Exhibit 10.17

EMPLOYEE PROFIT SHARING BONUS PLAN
OF
GAMMA-F CORP
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995)

2. DEFINITIONS. For purposes of the Plan, the following terms
shall have the ascribed meanings unless otherwise clearly apparent from the
context:

"Annual Operating Plan" (AOP) - shall mean the projected plans
of operations of the Company as approved by the Board of Directors for a
designated Fiscal Year.

"Board of Directors" - shall mean the Board of Directors of
Vertex Communications Corporation, the corporate parent of the Company, unless
otherwise clearly indicated.

"Bonus" - shall mean a cash distribution to be made to a
Participant for a Fiscal Year as determined in accordance with the provisions
of the Plan.

"Bonus Fund" - shall mean the targeted amount established each
Fiscal Year by the Board of Directors to fund the payment of the Bonuses for
such Fiscal Year hereunder.

"Bonus Share" - shall mean the share of the Bonus Fund
allotted to each Participant in accordance with the provisions of the Plan.

"Company" - shall mean Gamma-f Corp, a Subsidiary of Vertex
Communications Corporation.

"Compensation Committee" - shall mean the Compensation
Committee of the Board of Directors.

"Employee" - shall mean any person in the regular full-time
employment of the Company as determined by the personnel policies and practices
of the Company for the entire Fiscal Year applicable to the Plan, except,
however, any such person who is an officer or director of the Company or a
participant pursuant to the Management Incentive Compensation Plan of the
Company for such Fiscal Year.

"Fiscal Year" - shall mean the taxable year of the Company
ending September 30.

"Participant" - shall mean any Employee who is eligible to
receive a Bonus during the Fiscal Year.

"Plan" - shall mean the Employee Profit Sharing Bonus Plan of
the Company, as amended and restated effective as of October 1, 1995.
<PAGE> 2
"Pretax Income" - shall mean for each Fiscal Year the net
income of the Company before federal and state taxes determined in accordance
with generally accepted accounting principles consistently applied and as
approved by the independent public accountants who have examined the financial
accounts and records of the Company for such Fiscal Year; provided, however,
that such Pretax Income determination shall be adjusted to include the effect
of the amount of any Bonus paid or to be paid to a Participant pursuant to the
Plan.

4. PARTICIPATION IN THE PLAN. All Employees in the regular
employ of the Company as of the beginning of each Fiscal Year (October 1) are
eligible to participate in the Plan.

5. DETERMINATION OF THE BONUS FUND. Prior to the commencement of
each Fiscal Year, the Board of Directors shall determine the Projected Pretax
Income of the Company for such Fiscal Year and the amount of the Bonus Share of
each Participant in and to the Bonus Fund for such Fiscal Year, subject to the
terms of the plan. Within thirty (30) days thereafter, the Compensation
Committee shall determine the Bonus Share of the Bonus Fund to be allocated to
each Participant for such Fiscal Year pursuant to the following procedures:
<PAGE> 3
Step One:
The aggregate number of years of employment service of each
Participant with the Company shall be multiplied by the hourly
rate of compensation of each such Participant on October 1 of
such year.

Step Two:
The mathematical products thus determined in Step One above
for all Participants shall be aggregate in a total sum.

Step Four:
The amount of the Bonus Share of each Participant (expressed
in dollars) in and to the Bonus Fund for each Fiscal Year
shall be determined by multiplying the Bonus Fund for such
Fiscal Year by the quotient obtained in Step Three above as to
such Participant.

Adjustments:
In the event the Pretax Income actually achieved for a Fiscal
Year is less than the Projected Pretax Income pursuant to the
Annual Operating Plan for such Fiscal Year, the amounts of the
Bonus Fund and the respective Bonus Shares of the Participants
for such Fiscal Year shall each be decreased proportionately
by the percentage decrease represented by the amount the
Pretax Income achieved is less than the Projected Pretax
Income for such Fiscal Year. Conversely, in the event the
Pretax Income actually achieved for a Fiscal Year is more than
the Projected Pretax Income pursuant to the Annual Operating
Plan for such Fiscal Year, the amounts of the Bonus Fund and
the respective Bonus Shares of the Participants for such
Fiscal Year shall each be increased proportionately by the
percentage increase represented by the amount the Pretax
Income achieved exceeds the Projected Pretax Income for such
Fiscal Year.

The Compensation Committee shall notify each Participant in the Plan
of his/her Bonus Share for each Fiscal Year as soon as practical after the
projected amount thereof has been determined in accordance with the provisions
of the Plan.

6. AWARD OF BONUS COMPENSATION. Within sixty (60) days after
completion of the Company's Fiscal Year, the Compensation Committee shall
determine the amount of the Bonus to be paid to each Participant for such
Fiscal Year by dividing the audited Pretax Income actually achieved by the
Projected Pretax Income for such Fiscal Year, as determined by the Board of
Directors for such Fiscal Year. The percentage thus determined shall then be
multiplied by each Participant's approved Bonus Share to determine individual
Bonuses payable to Participants for such Fiscal Year. The amount of bonus
compensation thus determined shall be distributed by the Company to the
Participants within sixty days following the close of such Fiscal Year.

7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be
entitled to and shall receive the full amount of his/her Bonus for a Fiscal
Year, provided such Participant remains in the full-time employ of the Company
for such entire Fiscal Year. A Participant whose employment is terminated for
any reason shall forfeit his/her participation in the Plan and shall not be
entitled to any Bonus for such
<PAGE> 4
Fiscal Year. Notwithstanding the preceding, in the event of the death,
retirement, permanent disability, or any extended absence of a Participant, the
Compensation Committee shall have the power and the authority to determine
whether a Bonus should be paid to such Participant for such Fiscal Year. The
determination of the Compensation Committee in the exercise of such power and
authority in its sole discretion shall be final and binding upon each
Participant and anyone claiming by or through such Participant.

(b) No amendment, modification, or change may withdraw the
obligation and right of interpretation and administration of
the Plan from the Compensation Committee.

9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed
to give any Employee or his/her legal representative or assigns, or any other
person or entity claiming under or though him/her, any contract or other right
to participate in the benefits of the Plan other than as expressly set forth
herein. Nothing in the Plan shall be construed as constituting a commitment,
guarantee, agreement, or understanding of any kind or nature that the Company
will continue to employ any individual (whether or not an Employee or a
Participant); nor shall the Plan affect in any way the right of the Company to
terminate the employment of any individual (whether or not an Employee or a
Participant) at any time.

10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to
such other rights of indemnification as they may have as members of the
Directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceedings, or
in connection with any appeal thereof, to which they or any of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit, or proceedings, except in relation to matters as to which it shall be
adjudged in such action, suit, or proceedings that such Compensation Committee
member is liable for negligence or misconduct in the performance of his/her
duties, provided that within thirty (30) days after institution of any such
action, suit, or proceedings a Compensation Committee member shall in writing
offer the Company the opportunity, at its own expense, to pursue and defend the
same.

11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and
restated) supersedes all prior employee profit sharing bonus plans of the
Company, and shall be effective commencing as of October 1, 1995, and shall
remain in effect until terminated by the Board of Directors of the Company.

Executed this 26th day of September, 1995.

GAMMA-f CORP

By: /s/ J. Rex Vardeman
J. REX VARDEMAN, Chairman of the Board

ATTEST:

By: /s/ Joe A. Ylitalo
JOE A. YLITALO, Secretary

<PAGE> 1
EXHIBIT 11

VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES

COMPUTATION OF NET INCOME PER SHARE

(In thousands, except per share data)

<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY
- -------

Weighted average number of shares outstanding
during the period 4,454 4,610 4,107

Assume exercise of warrants and options at
beginning of the period or issue date 459 274 299

Shares assumed to be repurchased under
treasury stock method (332) (155) (161)
------- ------- -------

TOTAL 4,581 4,729 4,245
======= ======= =======

Net Income $ 5,195 $ 4,625 $ 4,001
======= ======= =======

PRIMARY NET INCOME PER SHARE $ 1.13 $ .98 $ .94
======= ======= =======

FULLY DILUTED
- -------------

Weighted average number of shares outstanding
during the period 4,454 4,610 4,107

Assume exercise of warrants and options at
beginning of the period or issue date 459 274 299

Shares assumed to be repurchased under
treasury stock method (283) (155) (160)
------- ------- -------

TOTAL 4,630 4,729 4,246
======= ======= =======

Net Income $ 5,195 $ 4,625 $ 4,001
======= ======= =======

FULLY DILUTED NET INCOME PER SHARE $ 1.12 $ .98 $ .94
======= ======= =======
</TABLE>

<PAGE> 1
Exhibit 13
Annual Report to Stockholders
(pages incorporated by reference)

Vertex Communications Corporation and Subsidiaries
SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
As of September 30, 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 65,024 $ 56,549 $ 53,869 $ 48,768 $ 39,710
Costs and expenses 58,547 50,880 48,564 44,585 36,309
Income before income taxes 7,015 6,294 5,601 4,282 3,466
Net income 5,195 4,625 4,001 2,902 2,376
Earnings per share 1.12 .98 .94 .84 .70

Working capital $ 33,396 $ 36,035 $ 32,937 $ 13,503 $ 11,731
Long-term debt 1,312 -- -- -- 500
Total assets 63,854 58,457 52,381 30,755 27,624
Total liabilities 14,168 11,272 10,060 9,650 9,581
Total shareholders' equity 49,686 47,185 42,321 21,105 18,043

Orders booked $ 79,132 $ 55,226 $ 58,476 $ 44,306 $ 50,322
Backlog of unfilled orders 44,136 30,028 31,351 26,744 31,205
</TABLE>

No cash dividends have been declared or paid
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

Overview of Vertex's Marketplace

Vertex sells its products to commercial concerns and government entities.
However, the telecommunications business climate and industry in which Vertex
operates is generally driven by private consumer needs and demands (except for
product sales to government entities or those related to government business).
A few common examples of such needs and demands are numerous forms of
communication by telephone, television programming sent via cable, and on-line
transaction execution by securities trading and brokerage firms of transactions
by individuals and businesses. As these private consumer needs increase or are
made available to a wider range of consumers, sales of Vertex's products can
benefit.

The Company's international sales, particularly in Western Europe and the Far
East, have grown in the last several years directly as a result of increased
consumer demand and more telecommunication services being made accessible in
regions or countries where these types of services were absent or limited.
Management also attributes sales growth in these geographic areas to the
Company's physical presence overseas. Vertex maintains a fully staffed sales
office in the United Kingdom and a subsidiary in Germany.

Management expects that the international markets will continue to be the major
source of future sales growth because of these favorable factors. On the other
hand, future sales growth domestically is not expected to be as great as
international sales growth because of some of these same factors. The Company
believes the domestic market is much more mature than currently prevails in
international markets and the competition is more intense.

Fiscal 1995 Compared to Fiscal 1994

The Company acquired Maxtech, Inc. (Maxtech) of State College, Pennsylvania, at
the beginning of the second quarter of fiscal 1995 for a purchase price of
approximately $5.5 million. Maxtech is engaged in the design, manufacture, and
distribution of precision radio frequency and microwave telecommunications
components and subsystems, with particular emphasis on earth station antennas
and point-to-point radio applications. Maxtech's operating results are
included in the Company's Consolidated Financial Statements as of January 1,
1995.

Consolidated net sales were $65.0 million in 1995 compared to $56.5 million in
1994, an increase of $8.5 million or 15.0 percent. The increase in net sales
was principally due to the Maxtech acquisition and increased international
sales. Within international sales, Western Europe sales were 16 percent and 18
percent of total sales in 1995 and 1994, respectively. Sales in the Far East
amounted to 28 percent and 22 percent of total sales in 1995 and 1994,
respectively. The Company believes sales in these two geographic regions
represent a significant portion of total sales because of the factors discussed
above.

Cost of sales expressed as a percent of total sales was 74.3 percent in 1995
compared to 74.6 percent in 1994. The Company continues to follow the strict
cost control program implemented several years ago but competitive pricing
pressures have prevented any meaningful improvement in this statistical
measurement. Research and development spending of $2.2 million in 1995
decreased by 17.9 percent from $2.6 million in 1994 due to certain product
development projects that were successfully completed in 1994. Marketing
expenditures increased 26.8 percent from $2.8 million in 1994 to $3.6 million
in 1995 primarily as a result
<PAGE> 3
of the Maxtech acquisition. General and administrative expenses were $4.5
million in 1995 compared to $3.3 million in 1994. This increase of $1.3 million
or 39.5 percent was due to the inclusion of Maxtech's operating results since
January 1995 and reassignment of certain personnel.

Vertex's effective tax rate was lower than the prescribed statutory rates in
1995 mainly due to tax incentives available from export shipments and certain
investment income that was nontaxable.

Net income of $5.2 million in 1995 compared to $4.6 million in 1994 increased
by $.6 million or 12.3 percent because of the aforementioned factors.

The Company ended fiscal 1995 with a record order backlog of $44.1 million
compared to $30.0 million one year earlier.

Fiscal 1994 Compared to Fiscal 1993

Consolidated net sales of $56.5 million increased by $2.7 million or 5 percent.
International sales as a percent of total sales were 73 percent in 1994 and 63
percent in 1993, respectively. Sales to the Far East increased to 22 percent of
total sales in 1994 compared to 14 percent of total sales in 1993. Western
Europe accounted for 18 percent of the Company's sales total in 1994 and 23
percent in 1993. Foreign sales were concentrated in these particular geographic
regions reflecting the above discussion of Vertex's marketplace.

Cost of sales declined slightly as a percentage of sales to 74.6 percent in
1994 from 74.8 percent in 1993. The cost-reduction and containment program
implemented by the Company continued to yield favorable results, however, those
gains were all but eliminated due to discounts the Company offered as a direct
result of competitive pricing pressures on certain products.

Research and development costs were $2.6 million in 1994 or $.4 million greater
than the 1993 cost level. Engineering design work was successfully completed
during 1994 on the new 16.4-meter antenna.

Marketing and general and administrative spending of $2.8 million and $3.3
million, respectively, remained unchanged in 1994 when compared to the 1993
levels.

Income from investments increased 111.1 percent to $.6 million in 1994 over
1993, primarily due to higher prevailing interest rates and increased cash
balances available for investment.

The effective tax rate was 27.6 percent of income before taxes for 1994
compared to 28.6 percent in 1993 mainly due to higher R&D credits and increased
benefit from export sales but partially offset by a foreign tax adjustment. The
Company adopted SFAS No. 109 as of the beginning of fiscal 1994 which resulted
in a cumulative benefit of $65,000.

Net income of $4.6 million in 1994 increased 15.6 percent over net income of
$4.0 million in 1993 principally due to increased sales.

IMPACT OF INFLATION

Generally, inflationary trends do not materially impact the Company's
operations. However, because the Company's sales contracts are negotiated on a
fixed-price basis prior to actual purchase of certain raw materials and
purchased parts, rapid unforeseen price increases in any of these items could
adversely affect profit margins for short periods. The Company has experienced
no significant difficulties in this regard
<PAGE> 4
over the recent past five years, and none is currently anticipated for the
foreseeable future.

IMPACT OF RATE CHANGES

The Company has two foreign subsidiaries whose operations are subject to the
effects of currency rate fluctuations. One subsidiary located in London,
England serves as a marketing and sales support office. Should the British
pound currency as related to the U.S. dollar turn materially unfavorable, the
Company's marketing expenses could increase accordingly.

The second subsidiary located in Duisburg, Germany is a complete operating
entity. Daily operations (sales, costs and expenses, and income taxes) are
conducted in its functional currency, the German mark. If this currency as
related to the U.S. dollar should change in a material adverse manner,
consolidated results of operations could be impacted. In addition, to the
extent taxable income is generated by the German subsidiary, the consolidated
effective tax rate is unfavorably impacted. The German statutory tax rate is
approximately 50 percent compared to the present U.S. statutory tax rate of 34
percent on taxable income up to $10 million.

The Company has not suffered any material losses or adverse effects due to
currency rate changes in the British pound or the German mark relative to the
U.S. dollar.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financing activities over the past three years were largely a
result of the following: (1) in fiscal 1993 the Company completed its second
public stock offering where 1,150,000 shares of common stock were sold for
$16.6 million or approximately $14.42 per share net of underwriting discounts
and offering expenses; and (2) during fiscal 1995, the Company repurchased
252,500 shares of its common stock for $3.2 million or an average price per
share of $12.62.

An analysis of total net cash provided by operating activities during the past
three years reflects that $10.8 million in cash was provided. Net income,
depreciation, and amortization over these three years totaled $19.2 million.
The difference between these two factors of $8.4 million was principally caused
by increased levels of accounts receivable of $4.5 million and inventories of
$3.5 million which were necessary to support higher sales. Investing
activities in 1995 of $8.0 million involved the acquisition of Maxtech, Inc.
and capital expenditures for equipment and facilities expansion. In 1994 the
Company invested $3.6 million in capital assets mainly for building additions
and production equipment in its Kilgore, Texas, facility. In 1993 the Company
acquired its German subsidiary for a cost of approximately $1.1 million and
spent $1.6 million for capital asset additions.

Management believes the Company's financial condition is excellent as is
evidenced by the ratio of current assets to current liabilities of 3.8 to 1.
The Company is not aware of any demands which are likely to affect its
financial condition in an adverse manner in the foreseeable future.

Based on the Company's strong financial condition, forecasted growth, and
expected future cash flows, management does not maintain a credit line
facility.
<PAGE> 5
Vertex Communications Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Year Ended September 30, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In thousands, except per share amounts)

NET SALES $ 65,024 $ 56,549 $ 53,869

COSTS AND EXPENSES:
Cost of sales 48,287 42,185 40,287
Research and development 2,165 2,637 2,203
Marketing 3,560 2,808 2,823
General and administrative 4,535 3,250 3,251
- ------------------------------------------------------------------------------------------------------------

58,547 50,880 48,564
- ------------------------------------------------------------------------------------------------------------

Operating income 6,477 5,669 5,305

OTHER INCOME (EXPENSE):

Income from investments 633 625 296
Interest expense (95) -- --
- ------------------------------------------------------------------------------------------------------------

Income before income taxes and
effect of accounting change 7,015 6,294 5,601

PROVISION FOR INCOME TAXES 1,820 1,734 1,600

Income before effect of accounting change 5,195 4,560 4,001
Cumulative effect of accounting change -- 65 --
- ------------------------------------------------------------------------------------------------------------

NET INCOME $ 5,195 $ 4,625 $ 4,001
============================================================================================================

EARNINGS PER SHARE:

Earnings before effect of accounting change $ 1.12 $ .97 $ .94
Cumulative effect of accounting change -- .01 --
- ------------------------------------------------------------------------------------------------------------

$ 1.12 $ .98 $ .94
============================================================================================================

AVERAGE SHARES AND EQUIVALENT
SHARES OUTSTANDING 4,630 4,729 4,246
============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 6
Vertex Communications Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
As of September 30, 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(In thousands, except share amounts)

ASSETS

Current assets:
Cash and cash equivalents $ 14,870 $ 20,527
Accounts receivable, less allowance for doubtful
accounts of $241 in 1995 and $263 in 1994 16,295 16,371
Inventories 14,324 8,940
Prepaid income taxes -- 668
- ------------------------------------------------------------------------------------------------------------

45,489 46,506
- ------------------------------------------------------------------------------------------------------------

Property and equipment:
Land 418 418
Buildings and improvements 6,925 6,331
Equipment 12,538 10,606
Construction in progress 917 708
Less: accumulated depreciation (8,400) (6,967)
- ------------------------------------------------------------------------------------------------------------

12,398 11,096
- ------------------------------------------------------------------------------------------------------------

Goodwill, net of accumulated amortization of $268 5,149 --
Other assets, less accumulated amortization of
$694 in 1995 and $361 in 1994 818 855
- ------------------------------------------------------------------------------------------------------------

TOTAL ASSETS $ 63,854 $ 58,457
============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,883 $ 2,396
Accrued liabilities:
Accrued compensation 1,799 2,381
Other 4,935 3,875
Customers' advances 2,015 1,186
Deferred income taxes 461 633
- ------------------------------------------------------------------------------------------------------------

12,093 10,471
- ------------------------------------------------------------------------------------------------------------

Acquisition indebtedness 1,312 --
Deferred income taxes 763 801
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock, $.10 par value, 20,000,000 shares
authorized, 4,661,402 issued 466 466

</TABLE>

<PAGE> 7

Capital in excess of par value 24,963 25,212
Retained earnings 26,758 21,563
Treasury stock, at cost, 230,146 shares in 1995 and
37,746 shares in 1994 (2,700) (109)
Translation adjustment 199 53
- ------------------------------------------------------------------------------------------------------------
49,686 47,185
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 63,854 $ 58,457
============================================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 8
Vertex Communications Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended September 30, 1995 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 5,195 $ 4,625 $ 4,001
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,391 1,650 1,353
Cumulative effect of change in accounting
for income taxes -- (65) --
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable 746 (5,529) 333
Inventories (3,404) (1,274) 1,159
Prepaid income taxes 668 (668) 280
Other assets (224) 332 (304)
Accounts payable and accrued liabilities (882) 2,054 (1,535)
Customers' advances 829 (1,216) 336
Deferred income taxes (210) 639 (265)
Other liabilities -- (200) --
- ------------------------------------------------------------------------------------------------------------

Net cash provided by oprating activities 5,109 348 5,358
- ------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment (2,488) (3,571) (1,592)
Acquisitions, net of cash acquired (5,524) -- (1,125)
- -------------------------------------------------------------------------------------------------------------

Net cash used in investing activities (8,012) (3,571) (2,717)
- -------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock -- -- 16,583
Purchase of treasury stock (3,186) -- --
Proceeds from exercise of stock options 220 186 393
Other 126 -- 239
- ------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) financing activities (2,840) 186 17,215
- ------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash 86 27 --
Net increase (decrease) in cash and cash
equivalents (5,657) (3,010) 19,856
Cash and cash equivalents at beginning
of year 20,527 23,537 3,681
- ------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Cash and cash equivalents at end of year $ 14,870 $ 20,527 $ 23,537
============================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:
Interest $ -- $ -- $ --
Income taxes 1,174 1,855 1,293
============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 10
Vertex Communications Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Capital in
Common Excess of Retained Treasury Translation
Stock Par Value Earnings Stock Adjustment Total
- -------------------------------------------------------------------------------------------------------------
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30,

1992 $ 351 $ 8,411 $ 12,937 $ (594) $ -- $ 21,105
- ------------------------------------------------------------------------------------------------------------

Exercise of stock options
(114,300) shares) -- 63 -- 330 -- 393
Sale of common stock
(1,150,000 shares) 115 16,468 -- -- -- 16,583
Tax benefit related to stock
options exercised by
employees -- 239 -- -- -- 239
Net income -- -- 4,001 -- -- 4,001
- ------------------------------------------------------------------------------------------------------------

1993 $ 466 $ 25,181 $ 16,938 $ (264) $ -- $ 42,321
- ------------------------------------------------------------------------------------------------------------

Exercise of stock options
(53,000 shares) -- 31 -- 155 -- 186
Translation adjustment -- -- -- -- 53 53
Net income -- -- 4,625 -- -- 4,625
- ------------------------------------------------------------------------------------------------------------

1994 $ 466 $ 25,212 $ 21,563 $ (109) $ 53 $ 47,185
- ------------------------------------------------------------------------------------------------------------

Exercise of stock options
(60,100 shares) -- (375) -- 595 -- 220
Purchase of treasury stock
(252,500 shares) -- -- -- (3,186) -- (3,186)
Tax benefit related to stock
options exercised by
employees -- 126 -- -- -- 126
Translation adjustment -- -- -- -- 146 146
Net income -- -- 5,195 -- -- 5,195
- ------------------------------------------------------------------------------------------------------------

1995 $ 466 $ 24,963 $ 26,758 $(2,700) $ 199 $ 49,686
============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 11
Vertex Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1995
The Company is engaged in the engineering, design, manufacture, and field
installation of satellite communications earth station antennas which operate
in the domestic, international, and military radio frequencies and range in
size from 1.8 meters to 34 meters in diameter.

1. SUMMARY OF ACCOUNTING PRACTICES

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its wholly- owned subsidiaries after elimination of
all signficant intercompany transactions.

RECOGNITION OF REVENUES, COSTS AND EXPENSES. Revenues from sales other than
long-term construction contracts are recognized when the earnings process has
been completed. The earnings process is considered complete upon shipment or
upon completion and storage of the equipment, if shipment is delayed at the
customer's request. Service revenues are recorded when the services are
rendered.

Sales contracts which extend beyond one year are accounted for using the
percentage of completion method. Under this method, revenues are recognized
based upon costs incurred compared to total costs expected. Continual
revisions of estimated total contract costs are made during the life of the
contracts based on the best information available and may result in current
period adjustments to contract revenues previously reported. Revenues include
contract costs and related profits. Amounts billed in excess of contract costs
and related profits are included in current liabilities and were $1,791,000 and
$1,155,000 at September 30, 1995 and 1994, respectively. Unbilled costs and
related profits included in accounts receivable at September 30, 1995 and 1994,
were $468,000 and $4,704,000, respectively.

Sales recognized on long-term construction contracts and the related cost of
sales were as follows:

(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Sales $ 11,484 $ 15,670 $ 13,899
Cost of Sales $ 10,126 $ 13,233 $ 12,278
</TABLE>

RESEARCH AND DEVELOPMENT. Company-funded research and development expenditures
are expensed as incurred, including costs relating to patents or rights which
may result from such expenditures. Costs generated by research and development
work funded by customers are expensed as cost of sales in the period when the
related revenues are recorded. Revenues are recorded in the period in which the
customer-funded work is completed. The Company has no obligation to repay any
funds provided by customers regardless of the outcome of research and
development work.

CASH EQUIVALENTS. The Company considers cash equivalents to be liquid
investments with original maturities of three months or less.

INVENTORIES. Inventories are valued at the lower of cost or market and include
the cost of raw materials, labor, plant overhead, and purchased parts. Cost is
determined using the first-in, first-out method. The components of inventory
consisted of the following:
<PAGE> 12

<TABLE>
<CAPTION>
(In thousands)
1995 1994
------------------------
<S> <C> <C>
Raw materials $ 4,476 $ 3,364
Work-in-process 8,661 5,070
Finished goods 1,187 506
------------------------
$14,324 $ 8,940
========================
</TABLE>
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost and are
depreciated over their estimated useful lives using the straight-line method.
The estimated useful lives of buildings are 25 years and equipment are 5 to 7
years. Expenditures for maintenance and repairs are charged to expense when
incurred; betterments and major renewals are capitalized.

GOODWILL. Goodwill represents the excess of purchase price over the fair market
value of net assets acquired. Goodwill is being amortized on a straight-line
basis over 15 years. The Company periodically reviews the carrying value of
this intangible asset and will make any necessary adjustment if the related
facts and circumstances suggest that its carrying value is impaired or is not
recoverable.

NON-CASH TRANSACTIONS. As part of the acquisition of the assets and ongoing
business of the Antenna Group of Krupp Industrietechnik GmbH of Germany in
fiscal 1993, and the acquisition of Maxtech, Inc. in fiscal 1995, the Company
assumed certain liabilities as follows:

<TABLE>
<CAPTION>
(In thousands)
Antenna Group
of Krupp Maxtech, Inc.
---------------------------------
<S> <C> <C>
Fair value of assets acquired $ 2,999 $8,683
Cash paid (1,125) (5,524)
----------------------------

Liabilities assumed $ 1,874 $ 3,159
============================
</TABLE>

EARNINGS PER SHARE. Earnings per share have been computed based upon the
weighted average number of shares of common stock outstanding and the dilutive
common stock equivalents assumed outstanding.

CONCENTRATION OF CREDIT RISK. The Company sells its products to certain
customers under specified credit terms in the normal course of business. These
customers can generally be classified as governmental agencies, communications
concerns, or other commercial entities. As of September 30, 1995, one
customer's account balance amounted to 21 percent of the Company's accounts
receivable.

Management believes no significant credit risks exist as of September 30, 1995.

RECLASSIFICATIONS. Certain prior year amounts have been reclassified in order
to conform with the current year presentation.

2. FOREIGN OPERATIONS

Financial information relating to the Company's foreign operations that were
acquired in fiscal 1993 (see Note 3) is shown below:
<PAGE> 13

<TABLE>
<CAPTION>
(In thousands)
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Sales to Unaffiliated Customers $3,724 $5,922 $3,417
Transfers between Geographic Areas 889 1,059 21
Operating Income (Loss) (263) 1,186 107
Identifiable Assets 2,366 4,002 3,482
</TABLE>

The Company translates the financial statements of its German subsidiary from
its functional currency, the German mark, into U. S. dollars in accordance with
the Financial Accounting Standards Board SFAS No. 52. Assets and liabilities
are translated at the exchange rate in effect at each fiscal year end, and
sales and expenses are translated at the weighted average exchange rate in
effect for the period reported upon. Any resulting gains or losses are
recorded in shareholders' equity and excluded from net income.

3. ACQUISITIONS

In December 1992, the Company organized a new wholly-owned subsidiary, Vertex
Antennentechnik GmbH, headquartered in Duisburg, Germany. Through this
subsidiary, the Company purchased the assets and ongoing business of the
Antenna Group of Krupp Industrietechnik GmbH of Germany for cash consideration
of approximately $1.1 million, effective December 31, 1992. This transaction
was accounted for under the purchase method and, accordingly, the results of
operations have been included in the consolidated financial statements from the
acquisition date.

On January 25, 1995 (effective January 1, 1995), the Company acquired all of
the outstanding common stock of Maxtech, Inc. for cash paid at closing of
$4,049,000, four-year unsecured promissory notes in the aggregrate principal
sum of $1,750,000, payable to former shareholders, all except one, who were
employed by the Company as of September 30, 1995, and direct acquisition costs
incurred of approximately $150,000. An additional sum of $1,650,000 was paid at
closing to pay off certain promissory notes of Maxtech to an unrelated third
party. The Maxtech acquisition was accounted for under the purchase method and,
accordingly, the assets acquired and liabilities assumed were recorded at their
fair values on the acquisition date. The excess purchase price over the assets
acquired was approximately $5,417,000.

In connection with the purchase of Maxtech, contingent consideration is due for
the amount equal to 50 percent of the net pre-tax income above $3,500,000 that
Maxtech earns for the cumulative period of three years and nine months ending
September 30, 1998, not to exceed $2,250,000. The contingent consideration, if
any, will be recorded as additional goodwill and amortized over the remaining
life of the intangible asset as discussed above.

Maxtech's results of operations have been included in the Company's
consolidated financial statements from the effective date of the acquisition.

Below are the unaudited pro forma results of operations as if Maxtech had been
acquired on October 1, 1993.

<TABLE>
<CAPTION>
(In thousands)
1995 1994
-------------------------
<S> <C> <C>
Net Sales $66,390 $62,831
Net Income 5,004 4,733
Earnings Per Share 1.08 1.00
</TABLE>
<PAGE> 14
4. SHAREHOLDERS' EQUITY

STOCK OPTION PLAN FOR KEY EMPLOYEES. The Company has a Stock Option Plan for
Key Employees, which provides for the granting of options to purchase the
Company's common stock to certain officers and key employees. Five hundred
fifty thousand (550,000) shares of common stock have been reserved for issuance
under this plan. The options are initially exercisable in equal pro rata
increments over a five-year period beginning one year after the grant date and
extend for terms of seven years. The option price is equal to at least 100
percent of fair market value on the date of the grant (110 percent in the case
of an option holder who owns stock representing more than 10 percent of the
combined voting power of the Company).

The following is a summary of the transactions under this plan for the years
ended September 30, 1995 and 1994:

<TABLE>
<CAPTION>
Number of shares
Option Price -----------------------
Per Share 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C>
Balance outstanding Oct. 1 $2.00-$15.50 271,600 308,600
Granted $10.00-$15.50 -- 20,000
Cancelled $10.00-$15.50 (2,000) (4,000)
Exercised $2.00-$10.00 (60,100) (53,000)
-------------------------

Balance outstanding Sept. 30 $3.00-$14.50 209,500 271,600
Exercisable Sept. 30 $3.00-$14.50 101,400 111,600
------------------------

Available for grant Sept. 30 25,000 23,000
=========================
</TABLE>

OUTSIDE DIRECTORS STOCK OPTION PLAN. The Company has an Outside Directors Stock
Option Plan whereby an outside director (any director not otherwise employed by
the Company) may be granted options to purchase the Company's common stock.
The maximum number of shares which may be covered by options granted to any
single director each year is 7,500, and the option price must equal at least
100 percent of fair market value at the date of grant.

Seventy-five thousand (75,000) shares of common stock have been reserved for
this plan. Once granted, the options expire in ten years.

Following is a table which summarizes the transactions under this plan for the
years ended September 30, 1995 and 1994.
<PAGE> 15

<TABLE>
<CAPTION>
Number of Shares
Option Price ---------------------
Per Share 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
Balance outstanding Oct. 1 $10.00 9,000 9,000
Granted $12.00 10,000 --
Exercised -- --
------------------------
Balance outstanding Sept. 30 $10.00-$12.00 19,000 9,000
Exercisable Sept. 30 $10.00-$12.00 19,000 9,000
------------------------
Available for Grant Sept. 30 40,000 50,000
</TABLE>

1995 STOCK COMPENSATION PLAN. In 1995, the Company adopted "The 1995 Stock
Compensation Plan" for key employees and advisors. This plan allows the Company
to grant options to purchase the Company's stock and stock appreciation rights
to officers, key employees, and advisors at an option price equal to market
value on the date of grant (110 percent in the case of an option holder who
owns more than 10 percent of the combined voting power of the Company's common
stock). The options are initially exercisable in equal pro rata portions over a
five-year period beginning one year after the grant date and extend for terms
of ten years. The plan allows for a total of five hundred thousand (500,000)
options to be granted.

Following is a summary of the activity under the plan since its inception:

<TABLE>
<CAPTION>
Option Price
Per Share Number of Shares
----------------------------------------------
<S> <C> <C>
Granted in Fiscal 1995 $12.00-$12.25 309,000
Balance outstanding Sept. 30, 1995 $12.00-$12.25 309,000
Exercisable Sept. 30, 1995 --
----------
Available for Grant Sept. 30 191,000
==========
</TABLE>

5. ACQUISITION INDEBTEDNESS

As part of the purchase price of Maxtech, Inc., the Company incurred four-year
unsecured promissory notes in aggregate principal sum of $1,750,000. The notes
are payable annually in four equal principal payments, including accrued
interest at 7.92 percent per annum with the initial payment due October 1,
1995. See Note 3 for further information.

6. INCOME TAXES

The Company adopted Financial Accounting Standards Board Statement No. 109
"Accounting for Income Taxes" effective October 1, 1993. This Standard required
the Company to change accounting for income taxes from the prior deferral
method to the liability method for financial reporting. The adoption of SFAS
No. 109 resulted in a one-time cumulative benefit in fiscal 1994 of $65,000 or
$.01 per share with a corresponding reduction in deferred income taxes.

The differences between the prescribed statutory income tax rates and the
Company's effective income tax rates were as follows:
<PAGE> 16
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes 2.1 .5 .9
Effect of nontaxable investment income (2.6) (2.8) (1.5)
Benefit from nontaxable FSC income (4.6) (4.0) (3.1)
Tax benefit from increased R&D activity (1.9) (3.4) (1.8)
Foreign tax adjustment (.6) 2.7 .3
Other, net (.5) .6 (.2)
----------------------------------------

25.9% 27.6% 28.6%
========================================
</TABLE>

Income (loss) before income taxes from foreign operations was $(400,000),
$1,200,000 and $107,000 in fiscal 1995, 1994, and 1993, respectively. Income
before income taxes from domestic operations was $7,415,000, $5,094,000, and
$5,494,000 in fiscal 1995, 1994, and 1993, respectively.

The provision for income taxes consists of the following significant
components:

<TABLE>
<CAPTION>
(In thousands)
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,661 $ 877 $1,808
Foreign 224 153 --
State 145 20 50
-----------------------------------------
Total Current 2,030 1,050 1,858

Deferred:
Federal 214 296 (258)
Foreign (424) 388 --
State -- -- --
-----------------------------------------
Total Deferred (210) 684 (258)
-----------------------------------------

Total provision for income taxes $ 1,820 $ 1,734 $1,600
=========================================
</TABLE>

Deferred income taxes are a result of certain income and expenses being
recognized in different periods for financial reporting and tax reporting
purposes. Below is a table which shows the components of deferred income
taxes:

(In thousands)
1995 1994
----------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves $ 647 $ 586
Other 29 22
----------------------------------

Deferred tax liabilities:
Property and equipment (782) (690)
Revenue recognition differences (888) (1,221)
Other (230) (131)
----------------------------------

Net deferred tax liability $(1,224) $ (1,434)
==================================
</TABLE>

<PAGE> 17
7. EMPLOYEE BENEFIT PLANS

The Company has a qualified Savings/Profit-Sharing Plan (the "Plan"), which
covers substantially all employees. Company contributions to the Plan, if any,
are determined at the discretion of the Board of Directors. The Company's
contributions to the Plan for fiscal years 1995, 1994, and 1993 were $228,000,
$223,000, and $203,000, respectively.

The Company has two cash incentive compensation plans which are based upon
results of annual operations compared to planned results. The Management
Incentive Compensation Plan's participants are key employees and officers, but
not outside directors. Compensation under the plan was $275,000, $787,000, and
$841,000 for fiscal 1995, 1994, and 1993, respectively. The Employee Profit
Sharing Bonus Plan's participants include substantially all employees except
officers. Compensation under this plan was $168,000, $232,000, and $236,000,
for fiscal 1995, 1994, and 1993, respectively.

8. RELATED PARTY TRANSACTIONS

A shareholder and member of the Board of Directors is a shareholder in a firm
retained by the Company for legal counsel. The Company paid fees to his firm
during the years ended September 30, 1995, 1994, and 1993 of $315,000,
$186,000, and $295,000, respectively.

9. SALES AND INDUSTRY SEGMENT INFORMATION

Sales to one customer in fiscal 1995, 1994, and 1993 were 1 percent, 19
percent, and 21 percent, respectively, of total sales.

The Company was a prime or subcontractor to various agencies of the United
States Government. Sales to these agencies were 12 percent of total sales in
fiscal 1993.

Export sales were 64 percent, 63 percent, and 57 percent, in fiscal 1995, 1994,
and 1993, respectively, of total sales. International sales expressed as a
percent of total sales were 68 percent, 73 percent, and 63 percent, in fiscal
1995, 1994, and 1993, respectively. Sales in Western Europe were 16 percent,
18 percent, and 23 percent of total sales in fiscal 1995, 1994, and 1993,
respectively. Sales in the Far Eastern countries amounted to 28 percent, 22
percent, and 14 percent of the sales total in fiscal 1995, 1994 and 1993,
respectively.

The Company operates primarily in a single industry segment, as a manufacturer
and supplier of microwave antennas and related equipment.

10. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1995 FISCAL QUARTERS
FIRST SECOND THIRD FOURTH
-------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 14,707 $16,258 $ 15,934 $18,125
GROSS PROFIT 3,679 4,529 4,348 4,181
NET INCOME 1,225 1,268 1,245 1,457
EARNINGS PER SHARE .26 .28 .28 .30
</TABLE>
<PAGE> 18

<TABLE>
<CAPTION>
1994 Fiscal Quarters
First Second Third Fourth
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $13,885 $14,160 $12,404 $16,100
Gross Profit 3,466 3,850 3,437 3,611
Net Income 1,128 1,193 981 1,323
Earnings Per Share .24 .25 .21 .28
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

The Company rents certain equipment and facilities under operating leases.
Rent expense under these leases for fiscal 1995, 1994, and 1993 was $380,000,
$268,000, and $265,000, respectively.

Below are the future rent payments due under these lease obligations and the
amounts of rental income due to be received under subleases as of September 30,
1995.

<TABLE>
<CAPTION>
Fiscal Year Rent Expense Payments Due
- ------------ -------------------------
<S> <C>
1996 $ 502,000
1997 347,000
1998 59,000
1999 9,000
2000 5,000
----------
$ 922,000
Less: Sublease Income 213,000
----------
$ 709,000
==========
</TABLE>

The Company indemnifies its directors and officers, but does not maintain
directors' and officers' liability insurance. No claims against directors or
officers have been asserted.
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Vertex Communications Corporation:

We have audited the accompanying consolidated balance sheets of Vertex
Communications Corporation (a Texas Corporation) and subsidiaries as of
September 30, 1995 and 1994, and the related consolidated statements of income,
cash flows, and shareholders' equity for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vertex Communications
Corporation and subsidiaries as of September 30, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.

As explained in Note 6 to the Financial Statements, effective October 1, 1993,
the Company changed its method of accounting for income taxes.

Arthur Andersen LLP
Dallas, Texas
October 27, 1995

MARKET FOR COMMON STOCK

The Company's common stock is traded on The Nasdaq Stock Market (National
Market System) under the symbol VTEX. At December 1, 1995, there were
approximately 1,500 holders of record of Vertex's common stock. The table below
sets forth, for the periods indicated, the high and low sales prices of the
Company's common stock, as reported by The Nasdaq Stock Market.

<TABLE>
<CAPTION>
Quarter Ended High Low Quarter Ended High Low
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1995 $19 1/4 $13 1/4 September 30, 1994 $13 $ 9 5/8
June 30, 1995 14 1/2 13 July 1, 1994 15 11 1/2
March 31, 1995 14 1/8 12 April 1, 1994 15 1/2 13
December 30, 1994 14 1/4 10 5/8 December 31, 1993 18 12 3/4
</TABLE>

The Company has never declared nor paid a cash dividend on its common stock and
does not expect that dividends will be declared or paid in the foreseeable
future. The Company currently intends to retain all of its available funds for
the operation and expansion of its business.

<PAGE> 1
EXHIBIT 22

VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
AS OF SEPTEMBER 30, 1995

Vertex Communications Foreign Sales Corporation
100% - Owned Subsidiary
Incorporated in the United States Virgin Islands

Gamma-f Corp.
100% - Owned Subsidiary
Incorporated in the State of Nevada

Vertex Antennentechnik GmbH
100% - Owned Subsidiary
Incorporated in the Federal Republic of Germany

Vertex International, Ltd.
100% - Owned Subsidiary
Incorporated in England

Maxtech, Inc.
100% - Owned Subsidiary
Incorporated in the State of Pennsylvania

<PAGE> 1
EXHIBIT 24

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
of our report by reference into this Form 10-K and into the Company's
previously filed Registration Statement File No. 33-27012 on Form S-8.

Arthur Andersen LLP

Dallas, Texas
December 18, 1995

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 14,870
<SECURITIES> 0
<RECEIVABLES> 16,295
<ALLOWANCES> 241
<INVENTORY> 14,324
<CURRENT-ASSETS> 45,489
<PP&E> 20,798
<DEPRECIATION> 8,400
<TOTAL-ASSETS> 63,854
<CURRENT-LIABILITIES> 12,093
<BONDS> 0
<COMMON> 466
0
0
<OTHER-SE> 49,220
<TOTAL-LIABILITY-AND-EQUITY> 63,854
<SALES> 65,024
<TOTAL-REVENUES> 65,024
<CGS> 48,287
<TOTAL-COSTS> 48,287
<OTHER-EXPENSES> 10,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 7,015
<INCOME-TAX> 1,820
<INCOME-CONTINUING> 5,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,195
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12

</TABLE>